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arushi_13
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Joined: 09 Feb 2008
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Posted: 03 Jul 2008 at 18:09 \| IP Logged

A scope limitation sufficient to preclude an unqualified opinion always will result when management:
1) prevents the auditor from reviewing the audit documentation of the predecessor auditor
2)Engages the auditor after year end physical inventory is completed
3)Requests that certain material A/R not be confirmed
4)Refused to acknowledge its responsibility for the fair presentation of the financial statements in conformity with GAAP.

Correct answer is 4)

I m unable to understand why the answer is not 2).In my opinion if the auditor is hired too late to observe the counting of the inventory, due to scope limitation caused it should be Qualified or Disclaimer of Opinion.

Please advise.

Thanks.

Chris40589
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Posted: 03 Jul 2008 at 18:18 \| IP Logged

4 is the correct answer. If the auditor is unable to observe the inventory count, then they will be required to perform other procedures to be reasonably assured that inventory is fairly stated. If, however, management doesn't acknowledge their responsibilty for the financial statements (presumably by failing to sign the representation letter) an unqualified opinion is inappropriate. Hope this helps.

Edited by Chris40589 on 03 Jul 2008 at 18:18

arushi_13
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Posted: 03 Jul 2008 at 18:31 \| IP Logged

Thanks a ton for your help and prompt reply.

I really appreciate it.

Thanks again,
Arushi

bopcpa
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Posted: 03 Jul 2008 at 22:53 \| IP Logged

Chris40589 wrote:

Can you give me examples for what other alternate procedures auditor can perform to verify inventory balance.

thx

Holly
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Posted: 05 Jul 2008 at 11:47 \| IP Logged

that's covered in an auditing book i have, which is pretty old, but it doesn't give anything really specific regarding what the alternative procedures actually are.

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