ExpertMedium1 markMultiple Choice
CPA · Question 70 · Area IV: Forming Conclusions and Reporting
An auditor is auditing the financial statements of a nonissuer. The auditor is unable to obtain the audited financial statements of a significant equity method investee. The investment is material to the client's financial statements. Management is unable to provide other sufficient appropriate evidence regarding the investment's value. <br/><br/>What is the appropriate audit opinion?
An auditor is auditing the financial statements of a nonissuer. The auditor is unable to obtain the audited financial statements of a significant equity method investee. The investment is material to the client's financial statements. Management is unable to provide other sufficient appropriate evidence regarding the investment's value. <br/><br/>What is the appropriate audit opinion?
Answer options:
A.
Unmodified opinion.
B.
Qualified or Adverse Opinion.
C.
Qualified or Disclaimer of Opinion.
D.
Unmodified with Emphasis-of-Matter.
How to approach this question
Scope Limitation (Can't get evidence) = Qualified or Disclaimer. GAAP Departure (Numbers are wrong) = Qualified or Adverse.
Full Answer
C.Qualified or Disclaimer of Opinion.✓ Correct
Qualified or Disclaimer of Opinion.
The inability to obtain sufficient appropriate audit evidence regarding a material equity method investment constitutes a scope limitation. Depending on the pervasiveness, the auditor issues a Qualified opinion or Disclaims an opinion.
Common mistakes
Confusing Scope Limitation with GAAP Departure.
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