If the auditor believes that required disclosures are omitted from the financial statements, the auditor should decide between issuing a(n)

If the auditor believes that required disclosures are omitted from the financial statements, the auditor should decide between issuing a(n)

a. Qualified opinion or an adverse opinion.
b. Disclaimer of opinion or a qualified opinion.
c. Adverse opinion or a disclaimer of opinion.
d. Unqualified opinion or a qualified opinion.








Answer: D

Keller, CPA, was about to issue an unqualified opinion on the financial statements of Lupton Television Broadcasting company when a letter was received from Lupton's independent counsel. The letter stated that the Federal Communications Commission has notified Lupton that its broadcasting license will not be renewed because of alleged irregularities in its broadcasting practices. Lupton cannot continue to operate without the license. Keller has also learned that Lupton and its independent counsel plan to take all necessary legal action to retain the license. The letter from independent counsel, however, states that a favorable outcome of any legal action is highly uncertain. On the basis of this information, what action should Keller take?

Keller, CPA, was about to issue an unqualified opinion on the financial statements of Lupton Television Broadcasting company when a letter was received from Lupton's independent counsel. The letter stated that the Federal Communications Commission has notified Lupton that its broadcasting license will not be renewed because of alleged irregularities in its broadcasting practices. Lupton cannot continue to operate without the license. Keller has also learned that Lupton and its independent counsel plan to take all necessary legal action to retain the license. The letter from independent counsel, however, states that a favorable outcome of any legal action is highly uncertain. On the basis of this information, what action should Keller take?

a. Issue an unqualified opinion, with an explanatory paragraph that describes the matter giving rise to the uncertainty.
b. Issue an unqualified opinion if full disclosure is made of the matter in a note to the financial statements.
c. Issue an adverse opinion and disclose all reasons why.
d. Issue a piecemeal opinion with full disclosure made of the license dispute in a note to the financial statements.












Answer: A

An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern. If the entity's disclosures about continued existence are adequate, the audit report may include A Disclaimer of Opinion A qualifed Opinion ----------------------- ------------------

An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern. If the entity's disclosures about continued existence are adequate, the audit report may include

A Disclaimer of Opinion A qualifed Opinion
----------------------- ------------------




a. Yes Yes
b. No No
c. No Yes
d. Yes No





Answer: B

When management prepares financial statements on the basis of a going concern and the auditor believes the company may not continue as a going concern, the auditor should issue a(n)

When management prepares financial statements on the basis of a going concern and the auditor believes the company may not continue as a going concern, the auditor should issue a(n)

a. Qualified opinion.
b. Unqualified opinion with an explanatory paragraph.
c. Disclaimer of opinion.
d. Adverse opinion.









Answer: B