Management Believes and the Auditor Is Satisfied, That a Material

question 73

Multiple Choice

Management believes and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of the potential loss, but fully discloses the situation in the notes to the financial statements. If the auditor wishes to call attention to the matter and management does not make an accrual in the financial statements, the auditor should issue a(an)

• A) Qualified report due to a scope limitation.
• B) Qualified report due to a departure from GAAP.
• C) Unqualified/unmodified report with an explanatory/emphasis-of-matter paragraph.
• D) Unqualified/unmodified report in a standard auditor's report.

---

Definitions:

Edema

Swelling caused by excess fluid trapped in the body's tissues, often affecting the extremities like hands, arms, feet, ankles, and legs.

Skin Assessment

A thorough evaluation of the skin to identify any conditions, diseases, or abnormalities, often conducted by healthcare professionals.

Hyperemia

An increase in blood flow to different tissues in the body, often resulting in redness and warmth.

Induration

The process of becoming hard or the condition of being hardened, often referring to an area of the skin that becomes firm from inflammation, edema, or malignant growth.