CPA Firm a Has Performed Most of the Audit of Consolidated

question 4

Multiple Choice

CPA Firm A has performed most of the audit of Consolidated Company's financial statements and qualifies as the group auditor.CPA Firm B did the remainder of the work.Firm A wishes to assume full responsibility for Firm B's work.Which of the following statements is correct?

• A)Such assumption of responsibility violates the profession's standards.
• B)In such circumstances,when appropriate requirements have been met,Firm A should issue a standard unmodified opinion on the financial statements.
• C)In such circumstances,when appropriate requirements have been met,Firm A should issue an unmodified opinion on the financial statements but should make appropriate reference to Firm B in the audit report.
• D)CPA firm A should normally qualify its audit report on the basis of the scope limitation involved when another CPA firm is involved.

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Definitions:

Working Capital

Current assets minus current liabilities, indicating the short-term liquidity of a company and its ability to pay off its obligations.

Short-Term Credit

Short-Term Credit refers to loans or lines of credit that are to be repaid within a short period, typically less than one year, used for immediate cash flow needs.

Seasonal Business

A business that experiences significant variations in demand and activity levels based on the season or time of year.

Working Capital Financing

Short-term financing used to finance the day-to-day operations of a business, specifically its current assets and liabilities.