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This file answers various report situations. Including such situations as:
1. What kind of opinion should the auditors write for each separate case?
2. What other modification(s) or addition(s) to the standard report is (are) required for each separate case?
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This file contains a formatted MS Word file containing the answers to various audit report situations.
For your convenience, I have attaced a formatted MS Word file containing the text below. I have also included reference sources which may prove useful in getting a better understanding of the material
Problem 12.37 - Various Report Situations.
Various Report Situations. Assume the auditors encountered the following separate situations when deciding upon the report to issue for the current-year financial statements.
1.The auditor decided that sufficient competent evidence could not be obtained to complete the audit of significant investments the company held in a foreign company.
In this case, since sufficient competent evidence could not be obtained by the auditor(s) to complete the audit, the auditor(s) must issue an adverse opinion to highlight the fact that there has been a lack of disclosure of significant material information on the part of the company's management team. Audit reports are to be designed to promote clear communication between the auditor(s) and readers of the financial statements in order to allow them to make well informed decisions. Subsequently, when the auditor has determined that there is a lack of important disclosures that can result in company's financial statements being misleading, an adverse opinion, as well as information regarding the lack of disclosures should be provided to readers of the audit report.
2. The company failed to capitalize lease assets and obligations, but explained them fully in the notes to the financial statements.
Rule 203 of the AICPA Code of Professional Conduct permits an auditor to issue an unqualified opinion when "there has been a material departure from GAAP if the client can demonstrate, and the auditor concurs, that due to unusual circumstances, the financial statements would have been misleading had GAAP been followed" (Rittenberg & Schwieger, 2005, p.616). Subsequently, in this instance, the auditor can proceed to issue an unqualified opinion, however, an informal paragraph should be added, either before or after the opinion paragraph, to describe the departure from GAAP, its approximate ...
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