(Solution) 17-37 For Each Of The Following Brief Scenarios, Assume That You Are The CPA Reporting On The Client's Nancial Statements. Using The Form Included... | Snapessays.com


(Solution) 17-37 For each of the following brief scenarios, assume that you are the CPA reporting on the client's nancial statements. Using the form included...


Circumstance Type of Opinion Alteration17-37

 

For each of the following brief scenarios, assume that you are the CPA reporting on the client’s

 

±nancial statements. Using the form included with this problem, describe the reporting

 

circumstance involved, the type or types of opinion possible in the circumstance, and the

 

appropriate report alterations. Since more than one report may be possible in several of the

 

circumstances, a second “type of opinion” and “report alteration” row is added for each

 

circumstance. For example, if the problem doesn’t tell you whether a misstatement pervasively

 

misstates the ±nancial statements or doesn’t list a characteristic that indicates pervasiveness, two

 

reports may be possible. In most cases, you will not need to use the second row. Do not read

 

more into the circumstance than what is presented, and only reply “emphasis of matter” in

 

auditor discretionary circumstances such as those suggested in the chapter. Unless

 

stated

 

otherwise, assume that the information presented is material to the ±nancial statement.

 

Circumstance

 

Type of

 

Opinion

 

Alteration

 

GC

 

Going concern

 

CON

 

Consistency

 

EMPH

 

Auditor discretionary emphasis of

 

matter

 

GROUP

 

Group audit

 

GAAP

 

Departure from GAAP

 

SCOPE

 

Scope limitation

 

COMP

 

Comparative financial statements

 

NONE

 

No circumstances

 

U Unmodified

 

Q Qualified

 

D Disclaimer

 

A Adverse

 

EOM

 

Emphasis of matter

 

QM

 

Other matter paragraph added

 

BFM

 

Basis for modi±cation paragraph

 

added

 

OTHER

 

Other alteration, but no

 

paragraph added

 

NO

 

No alteration

 

1. Your client has declined to depreciate its assets this year because the depreciation

 

expense would reduce the year’s small income to a loss.

 

2. A client’s ±nancial statements follow GAAP, but you wish to emphasize that the client is

 

a subsidiary of Webster Corporation in the audit report.

 

3. In auditing the long-term investments account of a new client, you are unable to obtain

 

audited ±nancial statements for the investee located in a foreign country. You conclude

 

that sufficient appropriate audit evidence regarding this investment cannot be obtained.

 

4. Due to a very major lawsuit, you have substantial doubt about a client’s ability to

 

continue as a going concern for a reasonable period of time. The ±nancial statement

 

disclosures related to this lawsuit are adequate.

 

5. You decide not to take responsibility for the work of the component auditors who

 

audited a 70 percent owned subsidiary and issued an unmodi±ed opinion. The total assets

 

and revenues of the subsidiary are 5 percent and 8 percent, respectively, of the total

 

assets

 

and revenues of the entity being audited.

 

6.

 

You decide to take responsibility for the work of the component auditors who audited a

 

70 percent owned subsidiary and issued an unmodi±ed opinion. The total assets and

 

revenues of the subsidiary are 5 percent and 8 percent, respectively, of the total assets

 

and revenues of the entity being audited.

 

7. A company has changed the remaining life of a signi±cant asset from 12 to 10 years. You

 

believe that the change is reasonable.

 


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This question was answered on: May 23, 2022

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