Answer(s): B
Explanation:
Choice "b" is correct. When an auditor concludes there is substantial doubt about an entity's
ability to continue as a going concern for a reasonable period of time, the auditor's responsibility
is to consider the adequacy of disclosure about the entity's possible inability to continue as a
going concern and include an explanatory paragraph in the audit report. Choice "a" is incorrect.
The auditor would include an explanatory paragraph following the unqualified opinion, or
disclaim an opinion due to a material uncertainty. A qualified or adverse opinion is not
appropriate for doubt about an entity's ability to continue as a going concern. Choice "c" is
incorrect. Management's accounting estimates are unrelated to going concern issues. Choice
"d" is incorrect. Going concern issues are considered prospectively. It is not appropriate to
reissue a prior audit report if doubt arises about an entity's ability to continue in a future period.
QUESTION: 36
Reference in a principal auditor's report to the fact that part of the audit was performed by
another auditor most likely would be an indication of the:

A. Divided responsibility between the auditors who conducted the audits of the components of
the overall financial statements.
B. Lack of materiality of the portion of the financial statements audited by the other auditor.
C. Principal auditor's recognition of the other auditor's competence, reputation, and professional
certification.
D. Different opinions the auditors are expressing on the components of the financial statements
that each audited.

Answer(s): A
Explanation:
Choice "a" is correct. Reference to another auditor indicates division of responsibility for the
audits of the components of the overall financial statements. Choice "b" is incorrect. Reference
to another auditor would not generally be made if the other auditor's portion of the financial
statements were immaterial. Choice "c" is incorrect. The reference in the report is not meant to
recognize the qualifications of the other auditor, but simply to divide the responsibility between
the two auditors.
Choice "d" is incorrect. The reference to the other auditor would be made regardless of what
type of opinion is expressed by each auditor.
QUESTION: 37
An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that
the entity being reported on had significant transactions with related parties. The inclusion of
this separate paragraph:

A. Is considered an "except for" qualification of the opinion.
B. Violates generally accepted auditing standards if this information is already disclosed in
footnotes to the financial statements.
C. Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing
Explanation."
D. Is appropriate and would not negate the unqualified opinion.

Answer(s): D

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