This Question Presents Independent Factual Situations an Auditor Might Encounter

question 544

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 An entity changes its depreciation method for production equipment from the straight-line to a units-of production method based on hours of utilization. The auditor concurs with the change although it has a material effect on the comparability of the entity's financial statements. 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:

African-Americans

A racial group in the United States with origins in the black racial groups of Africa, including those who trace their ancestry to slaves brought to the US and individuals who immigrated from African nations.

Seven Years' War

A global conflict fought between 1756 and 1763 that involved most of the great powers of the time and affected Europe, North America, Central America, the West African coast, India, and the Philippines.

Colonies' Economy

The economic systems and practices of European colonies, often characterized by agriculture, trade, and the exploitation of indigenous peoples and resources.

Treaty of Paris 1783

The agreement that ended the Revolutionary War, recognizing American independence from Britain and establishing the borders of the new nation.