otherwise unqualified opinion modified by adding an additional explanatory paragraph after the
opinion paragraph.
QUESTION: 40
Park, CPA, was engaged to audit the financial statements of Tech Co., a new client, for the year
ended December 31, 20X3. Park obtained sufficient audit evidence for all of Tech's financial
statement items except Tech's opening inventory. Due to inadequate financial records, Park
could not verify Tech's January 1, 20X3, inventory balances. Park's opinion on Tech's 20X3
financial statements most likely wil
be:
A. Option A
B. Option B
C. Option C
D. Option D

Answer(s): B
Explanation:
Choice "b" is correct. When the auditor is unable to satisfy himself or herself regarding the
amount of beginning inventory, he or she must disclaim an opinion on the income statement
because of the inability to verify the cost of goods sold during the year. The auditor may,
however, stil be able to issue an unqualified opinion on the balance sheet, since inventory can
be verified as of the balance sheet date. Choices "a", "c", and "d" are incorrect, based on the
Explanation above.
QUESTION: 41
Which paragraphs of an auditor's standard report on financial statements should refer to
generally accepted auditing standards (GAAS) and generally accepted accounting principles
(GAAP)?

A. Option A
B. Option B
C. Option C
D. Option D

Answer(s): C
Explanation:
Choice "c" is correct. The auditor states that the audit was conducted in accordance with GAAS
in the scope paragraph. The auditor expresses an opinion on the financial statements'
conformity with GAAP in the opinion paragraph.
Choices "a", "b", and "d" are incorrect, per the above Explanation.
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