[Anonymous]

An auditor concludes that is substantial doubt about an entitys ability to continue as a going concern. If the entitys disclosures are adequate, the audit report may include:

Disclaimer of opinion…. Except for qualified opinion.

a) yes / yes

b) No/ no

c) No/ yes

d) Yes /No.

The answer should be B) because the disclosures are adequate and therefore a unqualified with explanatory paragraph after opinion. Why does becker say d) ??

[rknight21]

wiley actually has this same question and the reasoning it has is that in such a case no departure from gaap has taken place, the situation was disclosed, therefore an adverse or qualified opinion is not appropriate but but you can still disclaim an opinion for other reasons that are not gaap related…..i dont know if that helped but thats what i got from it

[rknight21]

also what i think you are considering is assuming that the only opinion that can be is a unqualified one..infact in this case eaither an unqulified or a disclaimer is approriate…. not a qualified opinion or an adverse opinion.. there is no departure from gaappp

[Anonymous]

D

Going concern can only be Disclaimer or Unqualified with explanatory paragraph. chapter 1

[Anonymous]

rknight- i guess the question isnt explained properly..

chitown- going concern can also be qualified/adverse if inadequate Gaap Disclosure, so going concern can be unqualifed modified/qualifed/adverse/disclaimer , right?

[Anonymous]

If it is departure from GAAP, then adverse will be issued. Ultimately you are still treating going concern the same way as most of FS, except you can issue a disclaimer depending on the auditor

[Anonymous]

forgot to add qualified

[rknight21]

chitown i have to admit your last two comments are absolutely confusing but OP yes it can also be qualified or adverse (qualified really) if disclosures are not given…

[Anonymous]

I was going over this Module with Yaeger and I believe that a going concern issue with adequate disclosure should not lead to a disclaimer because it's not a scope limitation. There is nothing wrong with having a substantial doubt about the entity's ability to continue as a going concern. The financial statements may very well be ok with no material misstatements. So, I think it should be Unqualified with explanatory. So, I agree with the OP that should be NO, NO. But if the book says otherwise, I could be wrong. But there is nothing in this question that indicated a client-imposed or circumstance-imposed scope limitation. So, why are we disclaiming?? And also, Qualified also can be issued when there is a major scope limitation; it's not limited to a GAAP departure. Disclaimer is for a VERY major scope limitation and how major it is….that's a judgment call depending on the circumstance. So, the answer Yes/No further confuses me.

Argh! This is why I hate Auditing. It's like all of these hours of studying feel pointless.

I'll do further research when I get home….

But I'd be very careful in believing the answer key here. It looks like the book is incorrect.

[rknight21]

hmmm cpaman your right audit is a bit tricky…..but remeber you can issue a disclaimer for reasons other than a scope limitation, whether client imposed or not. so in essence you could issue an unqualified opinion or a disclaimer

taken from wikipedia( no i dont rely on passing the cpa using wikpedia) i just wanted to find a quick article to post regarding the issue

Although this type of opinion is rarely used,[6] the most common examples where disclaimers are issued include audits where the auditee willfully hides or refuses to provide evidence and information to the auditor in significant areas of the financial statements, where the auditee is facing significant legal and litigation issues in which the outcome is uncertain (usually government investigations), and where the auditee has going concern issues (the auditee may not continue operating in the near future).[6] Investors, lending institutions, and governments typically reject an auditee’s financial statements if the auditor disclaimed an opinion, and will request the auditee to correct the situations the auditor mentioned and obtain another audit report.

[rknight21]

and for the record i have seen this question about four times now during my studies and like everyone else i said no/no the first time…

[Anonymous]

rknight21- you could be right. I'll have to look into this more. This is strange.

[jbeans2009]

Going concern issue that's properly disclosed-can issue unqualified explanatory, or can issue disclaimer (throw ur hands up in the air and say u just don't know what'll be with the situation-like Gary from Yaeger says)

Going concern issue that's not property disclosed-can issue qualified/adverse

[Anonymous]

I was watching Gary's lecture on this during the past few days. Must've forgot the disclaimer part. Forgive me, there's a lot of stuff to memorize in this module, lol. But everything he said is all in my notes, so I can check it when I get home. I will post an update tonight.

But don't worry, I'll be sure to have all of this material down cold by May 28th when I take the exam. I promise. 😀

[Anonymous]

Ok, just took a look at my notes and can confirm that Becker's answer is indeed correct.

My notes (which were taken right from Gary's lecture) says that a Going Concern issue can lead to any of the 4 types of audit reports. If it's disclosed, then it's Unqualified Explanatory. HOWEVER, the auditor has a choice to issue a disclaimer and just throw his/her hands up in the air saying “I don't know”

If it's not disclosed in a footnote, that's a GAAP departure. It's either Qualified or Adverse depending on the severity.

Oh boy, I need to work very hard to make sure I have my notes memorized. The facts were right there and I forgot that one little nitpicky detail and couldn't answer the OP's question. Anyways, yes the answer is D. Becker is correct. That was a tricky one.

[Anonymous]

lol don't memorize it, understand the concept. I took AUD today, half through testlet #2 ,most of the questions were not similar to Becker's anymore. By the time when i was on Testlet #3, omg, some of the questions were ridiculous, they went into such small details. My last 10 questions required so much thinking and analyzing. I was able to eliminated two choices off every questions because each choice sounds like they can be correct. So overall, memorizing won't help.

Anyway, I think I did pretty darn good on MCQ despite with 10 days of study. However, sim got me pretty good. If I don't pass, it is the simulation =(

[Author]

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