ABC Company's financial statements contain a departure from generally accepted accounting principles because, due to unusual circumstances, the statements would otherwise be misleading. The auditor should express an opinion that isSelect one:a.There are no variations in the format and presentation of financial statements.b.The auditor is consulted before material changes are made in the application of accounting principles.c.Substantially different transactions and events are not accounted for on an identical basis.d.Unqualified and describe the departure in a separate paragraph.

Use the accompanying solution sheet to reply to the eight situations below that relate to the audit of financial statements of nonpublic companies. Unless indicated otherwise, assume that material amounts are involved. Do not consider including an emphasis-of-matter paragraph in an "auditor discretionary" circumstance. Situations: 1. A company has departed from GAAP. 2. A company's inventory records were deficient and the auditor was required to satisfy herself that the inventory was properly stated using alternative procedures. She is satisfied that she has sufficient appropriate evidence. 3. In auditing a client, an auditor has determined that substantial doubt exists about an entity's ability to continue as a going concern. 4. A group auditor decides not to take responsibility for the work of the component auditor who audited a 70% owned subsidiary and issued an unmodified opinion. The total assets and revenues of the subsidiary are 5% and 8%, respectively, of the total assets and revenues of the entity being audited. 5. A company changes from FIFO to LIFO for inventory valuation and the auditor concurs with the change. The change has a material effect on the comparability of the entity's financial statements this year, but is expected to have an immaterial effect in the future. 6. Inadequate record retention policies by the client have resulted in a situation in which a CPA is unable to obtain sufficient appropriate audit evidence with respect to a material account. 7. A CPA has decided to emphasize in the audit report that the company she audited is a component of XYZ Company, its parent. 8. A client has changed its estimate of likely doubtful accounts from 2% of credit sales to 3%. The auditor believes the change to be reasonable. Reply as to the type of opinion and other modification to the audit report as follows: A. Adverse D. Disclaimer Q. Qualified U. Unmodified Other Modification EOM Add an emphasis-of-matter paragraph. OM Add an other-matter paragraph. BFM Add a basis for modification paragraph. OTHER Make modifications other than adding an additional paragraph. NONE Make no modifications. If more than one type of opinion is appropriate list each—one with "Report 1" and one with "Report 2." If only "Report 1" is appropriate, place an X in the "Report 2" Opinion Type cell, which indicates no second type of report is appropriate. A) WHAT IS OPINION TYPE FROM REPORT 1 1-8 B) WHAT IS THE OPINION TYPE FOR REPORT 2 1- 8 C) WHAT IS OTHER MODIFICATION FOR REPORT 1 1-8 D) WHAT IS OTHER MODIFICATION FOR REPORT 2 1-8 CRITICALL EXAMINE IT AND PROVIDE THE CORRECT ANS FOR EACH SCENIOR A- D

ABC Co. has significant information that is transmitted, processed, maintained, and accessed electronically. The auditor has concluded that it is not possible to reduce detection risk to an acceptable level by performing only substantive tests for a number of financial statement assertions. The auditor's alternative strategy is toSelect one:a.Require management to change its information system to provide appropriate evidence.b.Perform tests of controls to gather evidential matter to use in assessing control risk related to those assertions.c.Focus audit tests on other assertions for which substantive tests prove to be effective.d.Increase the acceptable audit risk.

In conducting an audit of financial statements, the overall objectives of the auditor are:I : To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework;II : To report on the financial statements, and communicate as required by the PSAs, in accordance with the auditor's findings.Select one:a.Both I and IIb.Neither I nor IIc.II onlyd.I only

Which of these items does not form part of the financial report on which the auditor expresses an opinion?Group of answer choicesthe directors' reportany additional disclosures necessary to give a true and fair viewnotes required by Accounting Standardsthe statement of cash flows for the year

Which of the following types of audits is performed to determine whether an entity's financial statements are fairly stated in conformity with generally accepted accounting principles?Select one:a.Compliance auditb.Financial statement auditc.Performance auditd.Operational audit