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Practice CPA®CPA AUD Practice Exam 4Question 77

Medium1 markMultiple Choice

Area IV: ReportingAUDRelated PartiesReporting

CPA · Question 77 · Area IV: Reporting

An auditor is auditing the financial statements of a nonissuer. The auditor identifies a material related party transaction that was NOT disclosed in the notes. Management agrees it is a related party but refuses to disclose it. What is the appropriate opinion?

Answer options:

A.

Unmodified Opinion.

B.

Qualified or Adverse Opinion.

C.

Disclaimer of Opinion.

D.

Withdrawal from the engagement.

How to approach this question

Missing Disclosure = GAAP Departure. Material? Yes. Opinion = Qualified or Adverse.

Full Answer

B.Qualified or Adverse Opinion.✓ Correct

GAAP (ASC 850) requires disclosure of material related party transactions. Omission is a misstatement.

Common mistakes

Thinking related party issues are always scope limits.

Question 76 All questions Question 78

Practice the full CPA AUD Practice Exam 4

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