Textbook Notes (369,051)
Canada (162,364)
Accounting (51)
ACCTG456 (8)
Chapter 1

Chapter 1 in class questions_solutions.pdf

2 Pages

Course Code
Trish Stringer

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In Class # 1.1 (a) The client’s records are inadequate and the auditor is unable to obtain sufficient appropriate evidence. (b) There is a material uncertainty that casts a significant doubt on the entity’s ability to continue as a going concern and this uncertainty is adequately disclosed. (c) There is a GAAP departure concerning a highly material item. (d) The client will not allow the auditor to contact the client’s legal counsel. (e) The client’s accounting records have been destroyed. (f) There is a material misstatement in the client’s inventory account. The misstatement is deemed to be material but not pervasive to the financial statements. (g) Inventories are misstated. The misstatement is deemed to be material and pervasive to the financial statements. (h) There is an uncertainty relating to a pending exceptional litigation matter that is adequately disclosed in the notes. Required: What type of audit report would be appropriate in each of the above scenarios? Explain. The different reports choices are:  Unqualified – standard wording  Unqualified – emphasis paragraph  Qualified opinion – GAAP departure or material misstatement  Qualified opinion – scope limitation  Disclaimer (Denial)  Adverse (Note the following solution does not contain the rationale or explanation which would be required) a) A denial of opinion. b) Unqualified with Emphasis of Matter. c) Either an adverse opinion or a qualified opinion. d) Either a denial opinion or a qualified opinion. e) A denial of opinion. f) A qualified opinion. g) An adverse opinion. h) Unqualified with Emphasis of Matter. In Class # 1.2 In 2002 the audit firm Arthur Andersen collapsed following charges brought against it in the United States relating to the failure of its client, Enron. Some other clients announced that they would be dismissing Arthur Andersen as their auditor even before it was clear that Arthur Andersen would not survive. Required: Considering age
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