Restrictions Imposed by an Entity Prohibited the Observation of Physical

question 144

Multiple Choice

Restrictions imposed by an entity prohibited the observation of physical inventories, which accounted for 35 percent 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

• A)a qualified opinion on the entity's financial statements, referring to a departure from generally accepted accounting principles.
• B)a disclaimer of opinion on the entity's financial statements.
• C)an unqualified opinion on the entity's financial statements with an explanatory paragraph.
• D)an unqualified opinion on the entity's financial statements with a modification of the Basis for Opinion section.

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Definitions:

Net Sales

The amount of sales generated by a company after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Accounts Receivable

The money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Net Credit Sales

The total value of sales made on credit during a period, minus any sales returns or allowances.