In the First Audit of an Entity, Because of the Entity's

question 10

Multiple Choice

In the first audit of an entity, because of the entity's record retention policies, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. If the amounts in question could materially affect current operating results, the auditor would

• A) Be unable to express an opinion on the current year's results of operations and cash flows.
• B) Express a qualified opinion on the financial statements because of a client-imposed scope limitation.
• C) Withdraw from the engagement and refuse to be associated with the financial statements.
• D) Specifically state that the financial statements are not comparable to the prior year because of an uncertainty.

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Definitions:

Analytical Tools

Instruments or techniques used to analyze data or financial information, often for business or economic forecasting.

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, typically including balance sheet, income statement, and cash flow statement.

Days' Sales Uncollected

A financial ratio that indicates the average number of days it takes a company to collect payment after a sale has been made.

Inventory Turnover

A ratio showing how often a company's inventory is sold and replaced over a certain period.