An Auditor Concludes That There Is a Material Inconsistency in the Other

question 5

Multiple Choice

An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements.If the auditor concludes that the financial statements do not require revision,but the client refuses to revise or eliminate the material inconsistency,the auditor may

• A) Issue an "except for" qualified opinion after discussing the matter with the client's board of directors.
• B) Consider the matter closed since the other information is not in the audited financial statements.
• C) Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate explanatory/emphasis-of-matter paragraph.
• D) Revise the auditor's report to include a separate explanatory/emphasis-of- matter paragraph describing the material inconsistency.

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Definitions:

Step-down Method

The step-down method is an accounting practice used to allocate costs among departments, beginning with the highest cost pool.

Allocation Base A

An allocation base is a measure or quantity, such as machine hours or labor costs, used to assign indirect costs to different products or services.

Allocation Base B

A criterion or standard used to distribute overhead costs among various cost objects.

Step-down Method

A cost allocation method used in accounting to distribute overhead costs to various cost objects based on a hierarchical sequence of allocation bases.