Three of the Following Conditions Would, by Themselves, Require the Auditor

question 48

Multiple Choice

Three of the following conditions would, by themselves, require the auditor to issue a report other than an unqualified report. Which condition would permit a standard unqualified report?

• A) The financial statements show a significant net loss for each of the last three years, including the current fiscal period.
• B) The financial statements have not been prepared in accordance with an acceptable financial reporting framework and are misleading.
• C) The auditor is not independent during the fiscal period under audit.
• D) The scope of the auditor's examination has been restricted, although the cause of the restriction was not the client's fault.

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Definitions:

Depreciation

A technique for distributing the expense of a physical asset across its lifespan.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Common Stock

Type of equity ownership in a corporation, entitling holders to vote at shareholder meetings and to receive dividends.

Taxable Income

The amount of income that is used to calculate an individual's or a company’s income tax due, after exemptions and deductions.