Due to a Scope Limitation, an Auditor Disclaimed an Opinion

question 211

Multiple Choice

Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor's report included a statement that the current asset portion of the entity's balance sheet was fairly stated. The inclusion of this statement is:

• A) Not appropriate because it may tend to overshadow the auditor's disclaimer of opinion.
• B) Not appropriate because the auditor is prohibited from reporting on only one basic financial statement.
• C) Appropriate provided the auditor's scope paragraph adequately describes the scope limitation.
• D) Appropriate provided the statement is in a separate paragraph preceding the disclaimer of opinion paragraph.

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Definitions:

Nonconvex Preferences

Preferences where an individual values mixtures of goods or services less than pure bundles, violating the convexity assumption in utility theory.

Perfect Substitutes

Goods or services that can be used in place of each other with no loss of utility to the consumer.

Monotonic Transformation

A mathematical operation applied to a function that preserves the order of the data.

Utility Function

An equation that calculates the total utility a consumer gains from consuming a certain quantity of goods and services.