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

question 32

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:

Endorse

To formally support, approve, or sign a document, often to authenticate its validity or to transfer rights or ownership.

Debt

A financial obligation owed by one party (the debtor) to another (the creditor), typically involving borrowed money that is expected to be paid back with interest.

Holder In Due Course

A legal term referring to a person who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be asserted against the original party.

Demand Payment

A formal request for the payment of owed money.