[ironryanis]

Am I missing something? Why is answer D not the correct answer to this Wiley question? The correct answer is A. Below the answers is the SAS stament on Piecemeal opinions.

Q: Which of the following statements with respect to an auditor’s report expressing an opinion on a specific item in a financial statement is correct?

A. Materiality must be related to the specified item rather than to the financial statements taken as a whole.

B. Such a report can only be expressed if the auditor is also engaged to audit the entire set of financial statements.

C. The attention devoted to the specified item is usually less than it would be if the financial statements taken as a whole were being audited.

D. The auditor who has issued an adverse opinion on the financial statements taken as a whole can never express an opinion on a specified item in these financial statements.

.64 Piecemeal opinions (expressions of opinion as to certain identified

items in financial statements) should not be expressed when the auditor has

disclaimed an opinion or has expressed an adverse opinion on the financial

statements taken as a whole because piecemeal opinions tend to overshadow

or contradict a disclaimer of opinion or an adverse opinion. [Paragraph renumbered

by the issuance of Statement on Auditing Standards No. 79, December

1995.]

AUD 91
FAR 80
BEC 79
REG 84

[MaLoTu]

You cannot express an unmodified opinion on a specific line item under those circumstances (F/S have adverse or Disclaimer overall), but with this exception:

Becker says:

In this situation, when the auditor considers it appropriate to express an unmodified opinion it should only be done under these circumstances:

1) opinion on specific item is not published and doesn't accompany auditor's report on F/S; and

2) specific item does not constitute major portion of complete F/S

So, (D) is almost right, but there are exceptions …. If I understand correctly!

(A) is correct … materiality is considered separately for each item

[ironryanis]

So I can only express an opinion on a specific item if the FS taken as a whole are unmodified. Is that correct?

AUD 91
FAR 80
BEC 79
REG 84

[MaLoTu]

well, the exception says that you can give an unmodified opinion on a specific item, if the F/S as a whole had an adverse or Disclaimer, if the report on the line item is not published (restricted) and the item cannot be a pervasive item, like net income, stockholders' eq., or other items that have effects across most the statements. For example, an auditor can probably give an opinion on A/R without violation.

The piecemeal opinion cannot be presented with the auditor's report on the F/S that were disclaimed or adverse, overall. But, the piecemeal opinion can be presented separately, given it is on a non-pervasive line item.

Hope that makes sense.

[ironryanis]

Yes. Now answer D not being correct makes sense. Thanks.

AUD 91
FAR 80
BEC 79
REG 84

[Author]

Replies