Subsequent to the Close of Spacely Sprockets Fiscal Year Ending

question 44

Multiple Choice

Subsequent to the close of Spacely Sprockets fiscal year ending October 31, 2019, 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:

Trust

Confidence in the honesty, integrity, reliability, and competence of another person or entity.

Social Reality

Beliefs held in common by several or many people; public awareness.

Double Standard

Condemning women more than men for the same sexual behavior (e.g., premarital sex).

Attachment Styles

Patterns of bonding behavior that individuals display towards their partners, often developed in early childhood, influencing relationships throughout life.