Exam 12: Reports on Audited Financial Statements

When reporting on comparative financial statements,auditors ordinarily should modify their previously expressed opinion on the prior years' financial statements if the

Which of the following situations would require auditors to add an other-matter paragraph to their report on comparative financial statements?

During the year under audit,Forrest Corporation experienced significant losses due to a pervasive fraud scheme.Because of the lack of documentary evidence and inability to perform appropriate auditing procedures,the auditors were unable to determine the total amount of the loss.What type of report should the auditors issue?

When updating the report on prior years' financial statements presented in comparative form,the auditors' responsibility for the prior years' financial statements is

When a circumstance-imposed scope limitation has a material but not pervasive effect on the sufficiency of the auditors' evidence,the auditors' report will

An auditor who is unable to form an opinion on a new client's opening inventory balances may issue an unmodified opinion on the current year's

Which of the following situations would not result in auditors adding an additional paragraph to their report without modifying the introductory,scope,or opinion paragraphs of that report?

SEC registrants' financial statements should be accompanied by all of the following reports except:

Which of the following statements is not included in the Auditor's responsibility section of the standard (unmodified)report on the entity's financial statements?

If the auditors obtains sufficient appropriate evidence on the entity's accounts receivable balance by alternative procedures because it is impracticable to confirm accounts receivable,the opinion on the entity's financial statements should be unmodified and would

What is the auditors' responsibility for reporting on other information accompanying financial statements?

Restrictions imposed by an entity prohibited the observation of physical inventories,which accounted for 35% of total assets.Alternative auditing procedures were not feasible,although the auditors were able to examine satisfactory evidence for all other items in the financial statements.The auditors would most likely express

Which of the following phrases would auditors most likely include in their report when expressing a qualified opinion on the entity's financial statements because of inadequate disclosure?

An entity's comparative financial statements include the financial statements of the prior year that were audited by a predecessor auditor whose report is not presented.If the predecessor's report was qualified,the successor should

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

When a previously expressed opinion is updated from qualified to unmodified,the auditors' report on comparative financial statements should

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 which paragraphs,if any,of the standard report would be modified.

Harris is auditing the financial statements of Cole Corp.,an energy company.The FASB requires that these financial statements must be accompanied by supplementary mineral reserve information.If this required information is materially misstated,what type of report should Harris issue?

Management determined it was probable that a pending litigation claim would result in a material loss.The loss was disclosed in the footnotes to the financial statements but was not accrued in the income statement.If the auditors believe an accrual should be made,what type of report should be issued?

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