What Type of Reports Can an Auditor Issue If They

question 76

Essay

What type of reports can an auditor issue if they cannot provide an unqualified audit report?
The three types of reports other than unqualified are:
1.Qualified.The auditor's opinion is qualified because of either a scope limitation or a non-pervasive departure from Generally Accepted Accounting Principles (GAAP), but overall the financial statements were presented fairly.
2.Disclaimer.The auditor disclaims an opinion on the financial statements either because there is insufficient appropriate evidence to form an opinion on the overall financial statements or because there is a lack of independence.
3.Adverse.The auditor's opinion states that the financial statements are not presented fairly in conformity with GAAP because the departure materially affects the overall financial statements.

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Definitions:

FIFO Method

A method of inventory valuation that assumes the first items placed in inventory are the first sold, hence, the cost of the oldest inventory is used to determine the cost of goods sold.

Process Costing

A costing method used where similar products are produced continuously, allocating production costs based on the process or department.

Conversion Cost

The total cost of transforming raw materials into finished goods, including labor and manufacturing overhead.

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.