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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 10 )

Updated On: 9-Feb-2026
Page 10 of 207
PDF with 1026 Questions

Which paragraphs of an auditor's standard report on financial statements should refer to generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP)?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): C

Explanation:

Choice "c" is correct. The auditor states that the audit was conducted in accordance with GAAS in the scope paragraph. The auditor expresses an opinion on the financial statements' conformity with GAAP in the opinion paragraph.
Choices "a", "b", and "d" are incorrect, per the above Explanation.



In which of the following circumstances would an auditor be most likely to express an adverse opinion?

  1. The chief executive officer refuses the auditor access to minutes of board of directors' meetings.
  2. Tests of controls show that the entity's internal control is so poor that it cannot be relied upon.
  3. The financial statements are not in conformity with the FASB Statements regarding the capitalization of leases.
  4. Information comes to the auditor's attention that raises substantial doubt about the entity's ability to continue as a going concern.

Answer(s): C

Explanation:

Choice "c" is correct. An adverse opinion is issued when the financial statements are not presented in accordance with GAAP.
Choice "a" is incorrect. The client's refusal to provide access to the minutes of the Board of Directors' meetings would result in a disclaimer of opinion.
Choice "b" is incorrect. If internal control is so poor that it cannot be relied upon, the auditor must consider the effect on the audit procedures and subsequent report, but would not issue an adverse opinion.

Choice "d" is incorrect. Substantial doubt with regard to the entity's ability to continue as a going concern should be disclosed in an additional explanatory paragraph appended to an otherwise unqualified opinion.



When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the:

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

Choice "d" is correct.
When disclaiming an opinion because of scope limitations, the auditor should indicate in a separate paragraph(s) the reasons that the audit did not comply with GAAS. The auditor should also omit the scope paragraph. The opinion paragraph is not omitted; however it indicates that no opinion is expressed.
Choices "a", "b", and "c" are incorrect, as per the above Explanation.



An auditor decides to issue a qualified opinion on an entity's financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor's report should state that the qualification pertains to:

  1. A client-imposed scope limitation.
  2. A departure from generally accepted auditing standards.
  3. The possible effects on the financial statements.
  4. Inadequate disclosure of necessary information.

Answer(s): C

Explanation:

Choice "c" is correct.
When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself. Choice "a" is incorrect.
When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself. Choice "b" is incorrect. A scope limitation is a departure from generally accepted auditing standards. However, when an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects on the financial statements and not to the scope limitation itself. Choice "d" is incorrect. Inadequate disclosure of necessary information is a departure from GAAP, rather than a scope limitation.



When an auditor qualifies an opinion because of inadequate disclosure, the auditor should describe the nature of the omission in a separate explanatory paragraph and modify the:

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

Choice "d" is correct. In a report qualified for inadequate disclosure, the auditor would add an explanatory paragraph and modify the opinion paragraph, but the introductory and scope paragraphs would not be modified.
Choices "a", "b", and "c" are incorrect, as per the above Explanation.






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