Exam 12: Reports on Audited Financial Statements

When component auditors are involved in the audit of group financial statements, the group auditors are required to

Below are two independent situations. A. Grinner and Greeter, CPAs, were engaged to perform an audit of the financial statements of Happy, Inc. Happy's management would not allow Grinner and Greeter to confirm any of the accounts receivable. All other auditing procedures were performed as considered necessary by Grinner and Greeter and no issues were encountered. However, Grinner and Greeter were unable to satisfy themselves with regard to the balance in accounts receivable.B. Tick and Tie, CPAs, were performing their annual audit of Johnson Manufacturing Company. Johnson is currently being sued for $2,000,000 related to an alleged defective product that they sold to a customer. Johnson's legal counsel has told Tick and Tie that it is probable that Johnson will lose the suit and have to pay the entire $2,000,000. Johnson's management has included information in the footnotes about the lawsuit. However, they have not recorded any loss or liability in the income statement or balance sheet.Required:For each of the independent situations presented above, state what type of opinion should be issued on the company's financial statements. Briefly explain your rationale. Finally, state what modifications, if any, would be required to the standard report.

When a predecessor auditor has examined the prior years' financial statements presented in comparative format, the current auditors' report should

Auditors who are reporting on financial statements that contain a material departure from generally accepted accounting principles should

The auditors' report on the entity's financial statements included language disclosing a difference of opinion between the auditors and the entity for which the auditors believed an adjustment to the financial statements should be made. The Opinion Section of the auditors' report should express a(n)

Auditors are required to reference consistency in their report when there are changes in

When auditors lack independence, which of the following is true about the report on the entity's financial statements that should be issued?

Auditors who are reporting on financial statements that contain a material departure from generally accepted accounting principles should

When other information is presented in a document with audited financial statements, the auditors' report should

Holmes & Smith, LLP, were engaged to audit the financial statements of Sodolak Reality for the year ended December 31. During the engagement, Sodolak filed a lawsuit against Holmes & Smith, LLP. What effect, if any, will this lawsuit have on the auditors' report?

When auditors qualify their opinion on the entity's financial statements because of inadequate disclosure, the auditors should describe the nature of the omission and modify

If financial statements contain a material but non-pervasive departure from generally accepted accounting principles, the auditors should render a(n)

A report that acknowledges reliance on the reports of component auditors is a type of report modification known as a(n)

When other information is presented in a document with audited financial statements, the auditors' report should

If management fails to provide adequate justification for a change from one generally accepted accounting principle to another, the auditors should

In which of the following situations would auditors ordinarily choose between expressing a qualified opinion or an adverse opinion on the entity's financial statements?

Which of the following guidelines should be followed when a disclaimer of opinion is issued?

An auditor may report on summary financial statements that are derived from a complete set of audited financial statements only if the auditor

Which of the following would not be communicated to users in the auditors' report on an entity's financial statements and related disclosures?

An auditor may report on condensed financial statements that are derived from a complete set of audited financial statements only if the auditor