QUESTION: 42
In which of the following circumstances would an auditor be most likely to express an adverse
opinion?

A. The chief executive officer refuses the auditor access to minutes of board of directors'
meetings.
B. Tests of controls show that the entity's internal control is so poor that it cannot be relied upon.
C. The financial statements are not in conformity with the FASB Statements regarding the
capitalization of leases.
D. Information comes to the auditor's attention that raises substantial doubt about the entity's
ability to continue as a going concern.

Answer(s): C
Explanation:
Choice "c" is correct. An adverse opinion is issued when the financial statements are not
presented in accordance with GAAP. Choice "a" is incorrect. The client's refusal to provide
access to the minutes of the Board of Directors' meetings would result in a disclaimer of opinion.
Choice "b" is incorrect. If internal control is so poor that it cannot be relied upon, the auditor
must consider the effect on the audit procedures and subsequent report, but would not issue an
adverse opinion. Choice "d" is incorrect. Substantial doubt with regard to the entity's ability to
continue as a going concern should be disclosed in an additional explanatory paragraph
appended to an otherwise unqualified opinion.
QUESTION: 43
When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate
in a separate paragraph why the audit did not comply with generally accepted auditing
standards.
The auditor should also omit the:
A. Option A
B. Option B
C. Option C
D. Option D

Answer(s): D
Explanation:
Choice "d" is correct. When disclaiming an opinion because of scope limitations, the auditor
should indicate in a separate paragraph(s) the reasons that the audit did not comply with GAAS.
The auditor should also omit the scope paragraph. The opinion paragraph is not omitted;
however it indicates that no opinion is expressed.
Choices "a", "b", and "c" are incorrect, as per the above Explanation.
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