When Reporting on Comparative Financial Statements, Auditors Ordinarily Should Modify

question 5

Multiple Choice

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

• A)prior years' financial statements are restated to conform with generally accepted accounting principles.
• B)auditors were predecessor auditors who have been requested by a former client to reissue the previous report.
• C)prior years' opinions were unmodified and the opinion on the current year's financial statements is modified due to a lack of consistency.
• D)prior years' financial statements are restated following an acquisition in the current year.

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Definitions:

Profitable Use

The deployment of resources in a way that maximizes financial gain or return on investment.

Constrained Resource

A limited resource within a production process that restricts the company’s ability to meet demand.

Excess Capacity

Excess capacity refers to the situation where a company can produce more goods or provide more services than currently demanded, indicating unused production potential.

Financial Advantage

A benefit in monetary terms that allows a business or individual to have a better position compared to competitors or the market average.