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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 13 )

Updated On: 9-Feb-2026
Page 13 of 207
PDF with 1026 Questions

Under which of the following circumstances would a disclaimer of opinion not be appropriate?

  1. The financial statements fail to contain adequate disclosure of related party transactions.
  2. The client refuses to permit its attorney to furnish information requested in a letter of audit inquiry.
  3. The auditor is engaged after fiscal year-end and is unable to observe physical inventories or apply alternative procedures to verify their balances.
  4. The auditor is unable to determine the amounts associated with illegal acts committed by the client's management.

Answer(s): A

Explanation:

Choice "a" is correct. The failure of the financial statements to contain adequate disclosure of related party transactions, or other required disclosures, would result in a qualified or adverse opinion, not a disclaimer of opinion.
Choice "b" is incorrect. A client's refusal to permit its attorney to furnish information requested in a letter of audit inquiry would generally result in a disclaimer of opinion. Choice "c" is incorrect. The auditor's inability to observe physical inventories or apply alternative procedures to verify their balances could result in a disclaimer. Choice "d" is incorrect. The auditor's inability to determine the amounts associated with illegal acts committed by the client's management could result in a disclaimer.



Green, CPA, concludes that there is substantial doubt about JKL Co.'s ability to continue as a going concern. If JKL's financial statements adequately disclose its financial difficulties, Green's auditor's report should:

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

Answer(s): A

Explanation:

Choice "a" is correct. "Yes - Yes - Yes."
When a CPA concludes that there is substantial doubt about an entity's ability to continue as a going concern and the entity adequately discloses its financial difficulties, an unqualified opinion is appropriate.
An explanatory paragraph (following the opinion paragraph) should be used to highlight the situation.
This paragraph should include the phrases "substantial doubt" and "going concern." Choices "b", "c", and "d" are incorrect, per above.



An auditor may reasonably issue an "except for" qualified opinion for a(an):

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

Answer(s): C

Explanation:

Choice "c" is correct. Yes - Yes.
An "except for" qualified opinion is expressed when the "exceptions to GAAP" are not material enough to warrant an adverse opinion, or when scope restrictions are not material enough to warrant a disclaimer.
Choices "a", "b", and "d" are incorrect, per rule above.



The following explanatory paragraph was included in an auditor's report to indicate a lack of consistency:
"As discussed in note T to the financial statements, the company changed its method of computing depreciation in X0."
How should the auditor report on this matter if the auditor concurred with the change? Type of Location of opinion explanatory paragraph

  1. Unqualified Before opinion paragraph
  2. Unqualified After opinion paragraph
  3. Qualified Before opinion paragraph
  4. Qualified After opinion paragraph

Answer(s): B

Explanation:

Choice "b" is correct. If the auditor concurred with the change, a lack of consistency in applying GAAP would result in an unqualified opinion with an explanatory paragraph following the opinion paragraph.
Choice "c" is incorrect. If the change in accounting principle is not accounted for properly, then a qualified opinion would be appropriate and the explanatory paragraph would appear before the opinion paragraph.
Choices "a" and "d" are incorrect, per the above rules.



How does an auditor make the following representations when issuing the standard auditor's report on comparative financial statements?

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

Answer(s): D

Explanation:

Choice "d" is correct. Explicitly - Implicitly.
The auditor explicitly states in the scope paragraph of his opinion: "an audit includes examining, on a test basis, evidence supporting..."
Consistency is implied in the auditor's standard report. Choices "a", "b", and "c" are incorrect, as per above Explanation.






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