[CPApracticer]

I do not understand how C cannot be the answer too.

In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?

A.

The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedures.

B.

Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern are inadequately disclosed.

Incorrect C.

There has been a change in accounting principles that has a material effect on the comparability of the entity’s financial statements.

D.

The auditor is unable to apply necessary procedures concerning an investor’s share of an investee’s earnings recognized on the equity method.

You answered C. The correct answer is B.

If there are inadequately disclosed conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a going concern, the auditor must determine whether to issue a qualified or adverse opinion. When there is a departure from GAAP, the auditor must decide whether to issue either a qualified opinion or an adverse opinion.

F: 54 (4/13) 60 (4/14) 67 (9/14) 66 (10/14) 63 (11/15) 79 (2/16) PASSED
A: 60 (5/13) 80 (4/16) PASSED
R: 60 (7/13) 61 (2/15) 70 (4/15) 77 (7/15) PASSED
B: (6/16)

[Biff-1955-Tannen]

“There has been a change in accounting principles that has a material effect on the comparability of the entity's financial statements”

Just because it has a material effect does not mean that it is a GAAP departure that would warrant a qualified or adverse opinion.

The newly adopted accounting principle is a generally accepted accounting principle,
The method of accounting for the effect of the change is in conformity with generally accepted accounting principles,
The disclosures related to the accounting change are adequate
The company has justified that the alternative accounting principle is preferable.

These criteria would make it acceptable.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Author]

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