ExpertMedium1 markMultiple Choice
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?
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
Qualified or Adverse Opinion.
GAAP (ASC 850) requires disclosure of material related party transactions. Omission is a misstatement.
Common mistakes
Thinking related party issues are always scope limits.
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