Explanation:
Choice "d" is correct. Emphasis of a matter should be disclosed in an explanatory paragraph
appended to an otherwise unqualified opinion.
Choice "a" is incorrect. An "except for" qualification is used for a scope limitation or a departure
from GAAP, but not for emphasis of a matter.
Choice "b" is incorrect. The auditor may emphasize a matter even if it is included in the
footnotes. Choice "c" is incorrect. A phrase such as "with the foregoing Explanation" should not
be used in an unqualified opinion.
QUESTION: 38
When there has been a change in accounting principles, but the effect of the change on the
comparability of the financial statements is not material, the auditor should:

A. Refer to the change in an explanatory paragraph.
B. Explicitly concur that the change is preferred.
C. Not refer to consistency in the auditor's report.
D. Refer to the change in the opinion paragraph.

Answer(s): C
Explanation:
Choice "c" is correct. If an accounting change has no material effect on the comparability of the
financial statements, the auditor does not need to recognize the change in the current year's
audit report. Choice "a" is incorrect. The change would only be referred to in an explanatory
paragraph if the effect were material.
Choice "b" is incorrect. The auditor does not explicitly concur with the change in the report.
Choice "d" is incorrect. Even if the change had a material effect, the opinion paragraph would
not be affected. The explanatory paragraph would follow the opinion paragraph.
QUESTION: 39
When single-year financial statements are presented, an auditor ordinarily would express an
unqualified opinion in an unmodified report if the:

A. Auditor is unable to obtain audited financial statements supporting the entity's investment in a
foreign affiliate.
B. Entity declines to present a statement of cash flows with its balance sheet and related
statements of income and retained earnings.
C. Auditor wishes to emphasize an accounting matter affecting the comparability of the financial
statements with those of the prior year.
D. Prior year's financial statements were audited by another CPA whose report, which
expressed an unqualified opinion, is not presented.

Answer(s): D
Explanation:
Choice "d" is correct. Since only single-year financial statements are presented, the fact that
another CPA audited the prior year's financial statements is not relevant. Therefore, the auditor
would express an unqualified opinion in an unmodified report. Choice "a" is incorrect. The
situation described would result in a qualified opinion or disclaimer of opinion due to a scope
limitation. Choice "b" is incorrect. The situation described would result in an qualified opinion
due to inadequate disclosure. Choice "c" is incorrect. The situation described would result in an

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