[greeneyesCPA]

Under which of the following circumstances would a disclaimer of opinion not be appropriate?

a. The auditor is unable to determine the amounts associated with an employee fraud scheme.

b. Management does not provide reasonable justification for a change in accounting principles.

c. The client refuses to permit the auditor to confirm certain accounts receivable or apply alternative procedures to verify their balances.

d. The chief executive officer is unwilling to sign the management representation letter.

Which one is correct??????

FAR Passed
BEC Passed
AUD Passed
REG Passed

[R. Baker]

B.

An unjustified change in accounting principles would lead to a qualified report since it is a departure from GAAP.

You wouldn't issue a disclaimer of opinion just for a GAAP departure.

Illinois CPA

[greeneyesCPA]

According to Becker, withdrawing from the engagement shoud be considered when their is fraud. In that case, a disclaimer would no be issued. To me, both answers A and B are correct.

what am I failing to see?

FAR Passed
BEC Passed
AUD Passed
REG Passed

[Minimorty]

Isn't employee fraud different than management fraud? Man, I hate audit.

[greeneyesCPA]

These are the type of questions that mess us up.

Where in Becker does it say a “disclaimer” is ok for fraud?????

FAR Passed
BEC Passed
AUD Passed
REG Passed

[Jacquelyn]

I think B. You would give a qualified or adverse only on a GAAP departure. (either depends on severity). I HATE audit.

B 71, 74, 84*
A 74, 72, 69, 74, 87*
R 80* ... lost credit... 82* done forever!!!
F 68, 68, 74, 78*

Yep, I've gotten five 74's! Wah!

[kmwgrace]

*edited to remove incorrect answer & avoid confusion for others in the future.*

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[shiggity80]

It's B.

FAR: 87
AUD: 86
BEC: 86
REG: 84! Officially Done!

[greeneyesCPA]

B is the correct choice according to Becker passmaster.

FAR Passed
BEC Passed
AUD Passed
REG Passed

[kmwgrace]

Okay… so what did you mean when you said this?

“According to Becker, withdrawing from the engagement shoud be considered when there is fraud. In that case, a disclaimer would not be issued.”

Also sorry I confused you… go with Becker not me, I haven't taken the exam yet. :/

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[Minimorty]

As mentioned above, I hate audit and I am not good at audit. That being said, I thought that if there was fraud involving a lower level employee and that you could quantify the fraud then you could proceed with an opinion. I dont think that fraud by a lower level employee would cause you to withdraw from the engagement.

Where is that ExperiencedAuditor guy when you need him?

[nextstopCPA]

B-unreasonable justification precludes a disclaimer, a qualified or adverse opinion should be issued.

A disclaimer in opinion is OK for choice “A.” Fraud is bad but it didn't say anything about it being material nor did it say it was committed by management.

FAR Passed
REG Passed
AUD Passed
BEC Passed

All aboard, this train's leaving. Next stop, TBD!

[Minimorty]

According to the Ninjas – you dont even need to report lower level employee immaterial fraud to the audit committee.

[greeneyesCPA]

Found information in the Ancillary part of Becker, on page A3-39. It says:

“If the auditor is precluded from obtaining sufficient appropriate audit evedence about illegal act, generally a disclaimer of opinion should be isssued”

So, it seems as though an audit report can be issued. It can either be qualified or adverse when it pertains to departures from GAAPor proper disclosures, or a disclaimer if not enough audit evidence can be gathered concerning the illegal act.

FAR Passed
BEC Passed
AUD Passed
REG Passed

[greeneyesCPA]

@kmwgrace, on page A1-40 in becker, there is a pass key that says, “when exam questions indicate that the Financial Statments are false, fraudulent, deceptive or misleading, that managment refused to correct them, and that modification of the CPA's report is not suffiecient to correct the item, the CPA should consider withdrawing.”

This passage implies that you can still issue an opinion, but I had to dig furthur to find the answer…

FAR Passed
BEC Passed
AUD Passed
REG Passed

[kmwgrace]

Ah, tyvm. I think I was getting confused because it was an employee fraud scheme not management. I just remember on the MCQ's on *most* of the questions involving fraud, you couldn't disclaim but someone pointed out above that it was employee fraud in this situation so that's what turned me around.

I don't hate audit itself, but I do hate how they word the questions to try & trip us up. And questions that seem like they're asking the same thing, they change one little word and if you're not paying attention you don't see that switcheroo.

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[Author]

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