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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 14 )

Updated On: 9-Feb-2026
Page 14 of 207
PDF with 1026 Questions

An auditor was unable to obtain sufficient appropriate audit evidence concerning certain transactions due to an inadequacy in the entity's accounting records. The auditor would choose between issuing a(an):

  1. Qualified opinion and an unqualified opinion with an explanatory paragraph.
  2. Unqualified opinion with an explanatory paragraph and an adverse opinion.
  3. Adverse opinion and a disclaimer of opinion.
  4. Disclaimer of opinion and a qualified opinion.

Answer(s): D

Explanation:

Choice "d" is correct. Client-imposed restrictions of scope such as those caused by inadequate records would cause the auditor to choose between issuing a disclaimer of opinion and a qualified opinion.
Choice "a" is incorrect. An unqualified opinion would only be justified if the transactions in question were not material, but in such situations, no explanatory paragraph would be required. Choices "b" and "c" are incorrect. An adverse opinion pertains to GAAP and would not be used for reporting restrictions of scope.



In which of the following situations would a principal auditor least likely make reference to another auditor who audited a subsidiary of the entity?

  1. The other auditor was retained by the principal auditor and the work was performed under the principal auditor's guidance and control.
  2. The principal auditor finds it impracticable to review the other auditor's work or otherwise be satisfied as to the other auditor's work.
  3. The financial statements audited by the other auditor are material to the consolidated financial statements covered by the principal auditor's opinion.
  4. The principal auditor is unable to be satisfied as to the independence and professional reputation of the other auditor.

Answer(s): A

Explanation:

Choice "a" is correct.
When the principal auditor assumes responsibility for the other auditor's work, the principal auditor would not mention the other auditor in his audit report (opinion). The principal auditor would generally assume responsibility after reviewing the audit documentation of the other auditor and performing supplemental audit tests, or by reputation, e.g., if the other auditor is a correspondent (foreign) firm in which the principal auditor has developed confidence. Choices "b" and "c" are incorrect.
When the principal auditor finds it impractical to review the other auditor's work, or when the FS audited by the other auditor are material, it is more likely that the principal auditor will divide responsibility and make reference to the other auditor. Choice "d" is incorrect. The principal auditor should always make inquiries regarding the independence and professional reputation of the other auditor. Inability to become satisfied in this regard would constitute a scope limitation, resulting in a qualified opinion or disclaimer of opinion. In either of these scenarios, it is likely that the other auditor would be mentioned within an explanatory paragraph.



In which of the following situations would an auditor ordinarily issue an unqualified audit opinion without an explanatory paragraph?

  1. The auditor wishes to emphasize that the entity had significant related party transactions.
  2. The auditor decides to make reference to the report of another auditor as a basis, in part, for the auditor's opinion.
  3. The entity issues financial statements that present financial position and results of operations, but omits the statement of cash flows.
  4. The auditor has substantial doubt about the entity's ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements.

Answer(s): B

Explanation:

Choice "b" is correct. An auditor would generally issue an unqualified audit opinion without an explanatory paragraph when the auditor decides to make reference to the report of another auditor as a basis, in part, for the auditor's opinion. The auditor would modify his/her report (all three paragraphs), but would not add an explanatory paragraph. Choices "a" and "d" are incorrect. An auditor ordinarily would issue an unqualified opinion with an explanatory paragraph if he or she wishes to emphasize that the entity had significant related party transactions, or if the auditor has substantial doubt about the entity's ability to continue as a going concern (even if the circumstances are fully disclosed in the financial statements). Choice "c" is incorrect. If the entity issues financial statements that present financial position and results of operations but omit the statement of cash flows, the opinion will be qualified.



When there has been a change in accounting principle that materially affects the comparability of the comparative financial statements presented and the auditor concurs with the change, the auditor should:

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

Answer(s): A

Explanation:

Choice "a" is correct. No - No - Yes.
When a change in accounting principle materially affects the comparability of the comparative FS, the auditor should refer to the change in an explanatory paragraph following the unqualified opinion paragraph.
Choices "b" and "c" are incorrect. The auditor's concurrence with a change in GAAP is implicit, not explicit.
Choice "d" is incorrect. An unqualified opinion should be issued, not an "except for" qualified opinion.



When a qualified opinion results from a limitation on the scope of the audit, the situation should be described in an explanatory paragraph:

  1. Preceding the opinion paragraph and referred to only in the scope paragraph of the auditor's report.
  2. Following the opinion paragraph and referred to in both the scope and opinion paragraphs of the auditor's report.
  3. Following the opinion paragraph and referred to only in the scope paragraph of the auditor's report.
  4. Preceding the opinion paragraph and referred to in both the scope and opinion paragraphs of the auditor's report.

Answer(s): D

Explanation:

Choice "d" is correct.
When a qualified opinion results from a limitation of scope, it should be described in an explanatory paragraph preceding the opinion paragraph and referred to in both the scope and opinion paragraphs of the auditor's report.
Choices "a", "b", and "c" are incorrect, as they do not comply with the rule above.






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