When an Auditor Expects to Modify the Opinion of an Audit

question 58

Multiple Choice

When an auditor expects to modify the opinion of an audit report,the auditor should

• A)communicate with those charged with governance the circumstances that led to the modification and the proposed wording of the modification
• B)date and issue the report as of the end of field work
• C)advise management that a modified report will be issued due to certain circumstances
• D)increase substantive testing to substantiate the modified opinion

Recognize how specific legislations impact accounting practices and corporate governance.

Differentiate between asset and liability accounts within the framework of the balance sheet.

Understand the assumptions underlying the preparation of financial statements, including the monetary unit assumption and the time period assumption.

Understand the differences between common and special causes of variation in processes.

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Definitions:

Fixed Costs

Costs that remain constant in total regardless of changes in levels of activity or volume of output within a certain range.

Product Dropping

The process of discontinuing a product from a company's offerings, often due to poor sales, shifting market demands or strategic realignments.

Traceable Fixed Costs

Fixed costs that can be directly linked to a specific product, service, or segment of a business.

Joint Products

Multiple products that are produced from the same process or material inputs, where separation of the products occurs at a split-off point.