An auditor is auditing the financial statements of a nonissuer. The auditor decides to issue a qualified opinion due to a material misstatement. Which of the following is the correct placement of the paragraph describing the matter?

Answer options:

In an emphasis-of-matter paragraph following the opinion paragraph.

In a 'Basis for Qualified Opinion' paragraph following the opinion paragraph.

In the notes to the financial statements only.

How to approach this question

Correction: Under SAS 134 (current AICPA standards), the Opinion comes FIRST. The Basis for Opinion comes SECOND. This aligns with PCAOB. So the Basis follows the Opinion.

Full Answer

B.In a 'Basis for Qualified Opinion' paragraph following the opinion paragraph.✓ Correct

In a 'Basis for Qualified Opinion' paragraph preceding the opinion paragraph.

Under current standards (SAS 134 for nonissuers), the Auditor's Report begins with the Opinion section, followed immediately by the Basis for Opinion section. The description of the matter giving rise to the qualification is included in the 'Basis for Qualified Opinion' section.

Common mistakes

Relying on old standards where the Opinion was at the end.

Question 65 All questions Question 67

Practice the full CPA AUD Practice Exam 4

78 questions · hints · full answers · grading

More questions from this exam

Q01A CPA firm is performing an audit of a nonissuer, TechInnovate Inc. The engagement partner's spou...Hard Q02An auditor is performing an audit of an issuer, Global Corp, in accordance with PCAOB standards. ...Hard Q03A CPA is performing an audit of a county government entity that receives federal financial assist...Hard Q04During the audit of an employee benefit plan subject to ERISA, the auditor discovers that the pla...Hard Q05An auditor is evaluating the 'integrity' principle of the AICPA Code of Professional Conduct. Whi...Medium

View all 78 questions →