Subsequent to the Close of Spacely Sprockets Fiscal Year Ending

question 81

Multiple Choice

Subsequent to the close of Spacely Sprockets fiscal year ending October 31, 2012, a major debtor has declared bankruptcy due to a series of events.The receivable is significantly material in relation to the financial statements, and recovery is doubtful.The debtor had confirmed the full amount due to Spacely Sprocket at the balance sheet date.Because the account was confirmed at the balance sheet date, Spacely refuses to disclose any information in relation to this subsequent event.The CPA believes that all other accounts were stated fairly at the balance sheet date.In addition, Spacely changed their method of inventory valuation from FIFO to LIFO.This change was disclosed in Note X to the financial statements.Accordingly, what type of opinion should be expressed?

• A)Unqualified with an explanatory paragraph.
• B)Qualified due to a GAAP departure.
• C)Qualified due to a scope limitation.
• D)A combination of B and C.

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Definitions:

Weaken Response

A decrease in the strength or effectiveness of a reaction or response in a given situation.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, leading to a learned response.

Maladaptive Emotional Reactions

Emotional responses that are counterproductive to a person's current situation or well-being, interfering with normal functioning.

Phobias

Intense, irrational fears of specific objects or situations, leading to significant distress or impairment in social, occupational, or other important areas of functioning.