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:

Counting Method

A mathematical technique used to determine the total number of possible outcomes in a given situation.

Count And Divide

A method involving enumeration and separation into parts or groups, typically used for analytical or problem-solving purposes.

Intuitive Judgment

The ability to understand or know something without the need for conscious reasoning or direct evidence.

Bias

A tendency to favor or lean towards a particular perspective, judgment, or result over others, often in a way considered to be unfair.