This Question Presents Independent Factual Situations an Auditor Might Encounter

question 10

Multiple Choice

This question presents independent factual situations an auditor might encounter in conducting an audit. List B represents the report modifications (if any) that would be necessary. Select as the best answer for each item, the action the auditor normally would take. The report modifications in List B may be selected once, more than once, or not at all. Assume: - The auditor is independent. - The auditor previously expressed an unqualified opinion on the prior year's financial statements. - Only single-year (not comparative) statements are presented for the current year. - The conditions for an unqualified opinion exist unless contradicted in the factual situations. - The conditions stated in the factual situations are material. - No report modifications are to be made except in response to the factual situation. Item to Be Answered In auditing the long-term investments account, an auditor is unable to obtain audited financial statements for an investee located in a foreign country. The auditor concludes that sufficient appropriate audit evidence regarding this investment cannot be obtained. List B Report Modifications

• A) Describe the circumstances in an explanatory paragraph preceding the opinion paragraph without modifying the three standard paragraphs.
• B) Describe the circumstances in an explanatory paragraph following the opinion paragraph without modifying the three standard paragraphs.
• C) Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the opinion paragraph.
• D) Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the opinion paragraph.
• E) Describe the circumstances in an explanatory paragraph preceding the opinion paragraph and modify the scope and opinion paragraphs.
• F) Describe the circumstances in an explanatory paragraph following the opinion paragraph and modify the scope and opinion paragraphs.
• G) Describe the circumstances within the scope paragraph without adding an explanatory paragraph.
• H) Describe the circumstances within the opinion paragraph without adding an explanatory paragraph.
• I) Describe the circumstances within the scope and opinion paragraphs without adding an explanatory paragraph.
• J) Issue the standard auditor's report without modification.

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Definitions:

Risk Averse

A behavioral characteristic of individuals who prefer avoiding losses over acquiring equivalent gains; a preference for certainty over gamble.

Initial Public Offering

The process through which a private company goes public by offering its stocks to the public for the first time.

Investment Banks

Financial institutions that assist individuals, corporations, and governments in raising capital by underwriting or acting as the client's agent in the issuance of securities.

Tesla Motors

An American electric vehicle and clean energy company founded by Elon Musk, known for its innovative electric cars, solar products, and battery energy storage.