The auditor is satisfied that sufficient audit evidence supports management's assertions about
the nature and disclosure of the uncertainty. What type of opinion should the auditor express
under thesecircumstances?

A. Unqualified without an explanatory paragraph.
B. "Subject to" qualified.
C. "Except for" qualified.
D. Disclaimer of opinion.

Answer(s): A
Explanation:
Choice "a" is correct. The note presented describes an uncertainty that is properly discloseD.
An explanatory paragraph is not required in the unqualified opinion. Choice "b" is incorrect. A
"subject to" qualified opinion should never be issued. Choice "c" is incorrect. Since the auditor is
satisfied that the assertion and disclosure are supported by the existing evidence, a qualified
opinion is not required.
Choice "d" is incorrect. Since the auditor is satisfied that the assertion and disclosure are
supported by the existing evidence, there is no need for the auditor to disclaim an opinion.
QUESTION: 28
Kane, CPA, concludes that there is substantial doubt about Lima Co.'s ability to continue as a
going concern for a reasonable period of time. If Lima's financial statements adequately
disclose its financial difficulties, Kane's auditor's report is required to include an explanatory
paragraph that specifically uses the phrase(s):
A. Option A
B. Option B
C. Option C
D. Option D

Answer(s): D
Explanation:
Choice "d" is correct. If, after considering identified conditions and events and management's
plans, the auditor concludes that substantial doubt about the entity's ability to continue as a
going concern for a reasonable period of time remains, the audit report should include an
explanatory paragraph (following the opinion paragraph) to reflect that conclusion. This
conclusion should be expressed through the use of the phrase "substantial doubt about its (the
entity's) ability to continue as a going concern" [or similar wording that includes the terms
"substantial doubt" and "going concern"]. The "reasonable period...not to exceed one year" is
inherent in the definition of going concern and is not explicitly stated in the audit report. The
phrase "possible discontinuation of operations" may be included in the going concern disclosure
but is not specifically required. Choices "a", "b", and "c" are incorrect, as per the above

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