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:

Sensory Readiness

The state of being prepared to receive and process sensory information effectively, enhancing learning and interaction with the environment.

Gestalt Principle

A theory in psychology that proposes the human brain perceives whole objects rather than merely the sum of their parts.

Closure

The psychological term for the human desire to seek a sense of completeness and certainty in perceiving patterns.

Perceptual Set

A psychological mechanism that influences how we interpret sensory information, often based on our expectations, experiences, and context.