Holmes & Smith, LLP, Were Engaged to Audit the Financial

question 130

Multiple Choice

Holmes & Smith, LLP, were engaged to audit the financial statements of Sodolak Reality for the year ended December 31. During the engagement, Sodolak filed a lawsuit against Holmes & Smith, LLP. What effect, if any, will this lawsuit have on the auditors' report?

• A)The report should be modified to include an emphasis-of-matter paragraph describing the pending litigation.
• B)A disclaimer of opinion should be issued because the auditors' independence is impaired.
• C)The litigation will not have any impact on the report or auditors' independence unless Holmes & Smith are found guilty.
• D)A qualified or adverse opinion should be issued depending on the severity of the lawsuit.

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Definitions:

Five Food Groups

The categories that represent a balanced diet: fruits, vegetables, grains, protein foods, and dairy.

Ethnic Food Choices

The preference for foods that are traditional or characteristic of the cuisine of a particular ethnic group or culture.

Cholesterol Intake

The amount of cholesterol consumed through the diet, an important factor in managing risks for heart disease.

Fat Intake

The amount of fat consumed in one's diet, important for nutritional balance and health.