Cisco
CompTIA
ISC
EC-Council
EXIN
Fortinet
ITIL
Juniper
Microsoft
VMware
Avaya
SAP
Google
NVIDIA
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk
ServiceNow
All Vendors
  2. Home
  3. Exams
  4. AICPA
  5. CPA-Auditing

AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 15 )

Updated On: 9-Feb-2026
Page 15 of 207
PDF with 1026 Questions

Restrictions imposed by a client prohibit the observation of physical inventories, which account for 35% of all assets. Alternative audit procedures cannot be applied, although the auditor was able to examine satisfactory evidence for all other items in the financial statements. The auditor should issue a(an):

  1. "Except for" qualified opinion.
  2. Disclaimer of opinion.
  3. Unqualified opinion with a separate explanatory paragraph.
  4. Unqualified opinion with an Explanation in the scope paragraph.

Answer(s): B

Explanation:

Choice "b" is correct. Restrictions of scope imposed on the audit of such a large (35%) asset would require a disclaimer of opinion.
Choices "a" and "c" are incorrect. The asset not audited is too large for a qualified opinion and much too large for an unqualified opinion.
Choice "d" is incorrect. Explanatory language does not get inserted into the scope paragraph, nor is an unqualified opinion appropriate.



An auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. If the entity's disclosures concerning this matter are adequate, the audit report may include a(an):

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

Answer(s): D

Explanation:

Choice "d" is correct. Yes - No.
If an auditor concludes that there is substantial doubt about an entity's ability to continue as a going concern and that the entity's disclosures are adequate, then the audit report may be either:
- Unqualified with explanatory paragraph, or
- Disclaimed.
(Generally, an unqualified opinion is issued, but the auditor is not prohibited from choosing to issue a disclaimer.)
Choice "a" is incorrect. An "except for" qualified opinion would be appropriate if the entity's disclosures were inadequate.
Choice "b" is incorrect.
While an unqualified opinion is generally issued, the auditor is not prohibited from choosing to issue a disclaimer; for example, in areas involving a high degree of uncertainty.
Choice "c" is incorrect, per Explanation above.



An auditor should disclose the substantive reasons for expressing an adverse opinion in an explanatory paragraph:

  1. Preceding the scope paragraph.
  2. Preceding the opinion paragraph.
  3. Following the opinion paragraph.
  4. Within the notes to the financial statements.

Answer(s): B

Explanation:

Choice "b" is correct. The auditor should disclose the substantive reasons for expressing an adverse opinion in a separate explanatory paragraph preceding the opinion paragraph. Choice "a" is incorrect. There are no circumstances where an explanatory paragraph precedes the scope paragraph.
Choice "c" is incorrect. The explanatory paragraph follows the opinion paragraph when there is a change in accounting principle or when there is doubt as to going concern. Choice "d" is incorrect. The auditor cannot include an explanatory paragraph in the financial statements, which are the responsibility of management.



When management does not provide reasonable justification that a change in accounting principle is preferable and it presents comparative financial statements, the auditor should express a qualified opinion:

  1. Only in the year of the accounting principle change.
  2. Each year that the financial statements initially reflecting the change are presented.
  3. Each year until management changes back to the accounting principle formerly used.
  4. Only if the change is to an accounting principle that is not generally accepted.

Answer(s): B

Explanation:

Choice "b" is correct.
When management does not provide reasonable justification that a change in accounting principle is preferable and it presents comparative FS, the auditor should express a qualified opinion each year that the FS initially reflecting the change are presented. Choices "a", "c", and "d" are incorrect, per the rule stated above.



When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(an):

  1. Compilation report.
  2. Disclaimer of opinion.
  3. Unaudited association report.
  4. Qualified opinion.

Answer(s): B

Explanation:

Choice "b" is correct. A "disclaimer of opinion" must be issued when a CPA is "associated" with FS of a publicly held entity, but has not audited or (interim) reviewed such FS. Choice "a" is incorrect. A "compilation report" refers to a report related to a non-public entity. Choice "c" is incorrect. There is no such thing as an "unaudited association report." Choice "d" is incorrect. The auditor did not audit the FS, so he/she cannot issue an opinion on them.






Post your Comments and Discuss AICPA CPA-Auditing exam prep with other Community members:

Join the CPA-Auditing Discussion