Restrictions Imposed by an Entity Prohibited the Observation of Physical

question 65

Multiple Choice

Restrictions imposed by an entity prohibited the observation of physical inventories,which accounted for 35% of total assets.Alternative auditing procedures were not feasible,although the auditors were able to examine satisfactory evidence for all other items in the financial statements.The auditors would most likely express

• A) a qualified opinion on the entity's financial statements, referring to a departure from generally accepted accounting principles.
• B) a disclaimer of opinion on the entity's financial statements.
• C) an unmodified opinion on the entity's financial statements with an additional paragraph.
• D) an unmodified opinion on the entity's financial statements with a modification of the Auditor's Responsibility section.

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Definitions:

Direct Materials

The raw materials directly used in the manufacturing of a product.

Budgeted Operating Income

The anticipated revenue from operations minus the expected operating expenses for a certain period, typically before financial expenses and taxes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, often used in variance analysis.

Variable Costs

Charges that adjust in line with the scale of production or sales figures.