When an Auditor Discovers a Highly Material GAAP Violation in the Financial

question 157

True/False

When an auditor discovers a highly material GAAP violation in the financial statements and the client refuses to correct it, the auditor should issue a disclaimer of opinion.

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Definitions:

Contractual Obligation

A contractual obligation is a duty or responsibility that one party is legally bound to perform under a contract agreement with another party.

Cash Consideration

Payment made in cash during a transaction, as opposed to stock exchange or other non-cash assets.

Amortised Cost

A financial valuation technique that gradually writes off the initial cost of an asset over a period, or the method of allocating the cost of an intangible asset over its useful life.

Effective Interest Rate

The rate that discounts the estimated future cash payments or receipts through the expected life of the financial liability or asset or, when appropriate, a shorter period to the net carrying amount of the financial asset.