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ASH ACC 410 Week 5 Assignment .pdf



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ASH ACC 410 Week 5 Assignment Audit
Report Modifications Paper
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http://www.assignmentclick.com/acc-410ash/acc-410-week-5-assignment-auditreport-modifications-paper
Audit Report Modifications. Complete problem below. List a represents the types of
opinions the auditor ordinarily would issue and List B represents the report
modifications [if any] that would be necessary. Select as the best answer for each
situation [items 1 to 6] the type of opinion and modifications, if any, the auditor
would normally select. The types of opinions in List A and the report modifications in
List B may be selected once, more than once, or not at all. The paper should be 2-3
pages.
Problem:
Items 1 through 6 present various independent factual situations an auditor might
encounter in conducting an audit. For each situation assume:
Assume:
•The auditor is independent.
•The auditor previously expressed an unqualified opinion on the prior year’s
financial statements.
•Only single-year (not comparative) statements are presented for the current year.
•The conditions for an unqualified opinion exist unless contradicted in the factual
situations.
•The conditions stated in the factual situations are material.
• • No report modifications are to be made except in response to the factual
situation.
Situations:
1. In auditing the long-term investments account, an auditor is unable to obtain
audited financial statements for an investee located in a foreign country. The auditor

concludes that sufficient appropriate audit evidence regarding this investment
cannot be obtained.
2. Due to recurring operating losses and working capital deficiencies, an auditor has
substantial doubt about an entity’s ability to continue as a going concern for a
reasonable period of time. However, the financial statement disclosures concerning
these matters are adequate.
3. A principal auditor decides to take responsibility for the work of another CPA who
audited a wholly owned subsidiary of the entity and issued an unqualified opinion.
The total assets and revenues of the subsidiary represent 17 percent and 18 percent,
respectively, for the total assets and revenues of the entity being audited.
4. An entity issues financial statements that present financial position and results of
operations but omits the related statement of cash flows. Management discloses in
the notes to the financial statements that it does not believe that statement of cash
flows to be a useful financial statement.
5. An entity changes its depreciation method for production equipment from
straight-line to a units-of-production method based on hours of utilization. The
auditor concurs with the change, although it has a material effect on the
comparability of the entity’s financial statements.
6. An entity discloses certain lease obligations in the notes to the financial
statements. The auditor believes that the failure to capitalize these leases is a
departure from generally accepted accounting principles.
Required:
List A represents the types of opinions the auditor ordinarily would issue and List B
represents the report modifications (if any) that would be necessary. Select as the
best answer for each situation (items 1 through 6) the type of opinion and
modifications, if any, the auditor would normally select. The types of opinions in List
A and the report modifications in List B may be selected once, more than once, or not
at all.
(AICPA, adapted) List A List B
TypesofOpinions ReportModifications
A. An "except for" qualified opinion H. Describe the circumstances in a explanatory
paragraph preceding the opinion paragraph without modifying the three standard
paragraphs.
B. Anunqualifiedopinion I. Describe the circumstances in an explanatory paragraph
following the opinion paragraph without modifying the three standard paragraphs.
C. Anadverseopinion J. Describe the circumstances in an explanatory paragraph
preceding the opinion paragraph, and modify the opinion paragraph.
D. A disclaimer of opinion K. Describe the circumstances in an explanatory
paragraph following the opinion paragraph, and modify the opinion paragraph.
E. Either an "except for" qualified opinion or an adverse opinion. L. Describe the
circumstances in an explanatory paragraph preceding the opinion paragraph, and
modify the scope and opinion paragraphs.
F. Either a disclaimer of opinion or an "except for" qualified opinion. M. Describe the
circumstances in an explanatory paragraph following the opinion paragraph, and
modify the scope and opinion paragraphs.

G. Either an adverse opinion or a disclaimer of opinion N. Describe the circumstances
within the scope paragraph without adding an explanatory paragraph.
O. Describe the circumstances within the opinion paragraph without adding an
explanatory paragraph.
P. Describe the circumstances within the scope and opinion paragraphs without
adding an explanatory paragraph.

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