B. There is substantial doubt about the entity's ability to continue as a going concern.
C. Management's estimates of the effects of future events are unreasonable.
D. Certain transactions cannot be tested because of management's records retention policy.

Answer(s): B
Explanation:
Choice "b" is correct. If, after considering identified conditions and events and management's
plans, the auditor concludes that substantial doubt about the entity's ability to continue as a
going concern for a reasonable period of time remains, the audit report should include an
explanatory paragraph to reflect that conclusion. Choice "a" is incorrect. Reporting on just the
balance sheet is acceptable provided access to financial information is not limited. Such
reporting does not require an explanatory paragraph. Choice "c" is incorrect. If the auditor
concludes that management's estimate is unreasonable and that its effect is to cause the
financial statements to be material y misstated, the auditor should express a qualified or an
adverse opinion. Choice "d" is incorrect. Restrictions on the scope of the audit, whether
imposed by the client or by circumstances, may require the auditor to qualify or to disclaim an
opinion.
QUESTION: 49
When an entity changes its method of accounting for income taxes, which has a material effect
on comparability, the auditor should refer to the change in an explanatory paragraph added to
the auditor's report. This paragraph should identify the nature of the change and:

A. Explain why the change is justified under generally accepted accounting principles.
B. Describe the cumulative effect of the change on the audited financial statements.
C. State the auditor's explicit concurrence with or opposition to the change.
D. Refer to the financial statement note that discusses the change in detail.

Answer(s): D
Explanation:
Choice "d" is correct. The paragraph should refer to the note in the financial statements that
discusses the change in detail. Fol owing is an example of an appropriate explanatory
paragraph:
"As discussed in Note X to the financial statements, the company changed its method of
accounting for income taxes in X2."
Choice "a" is incorrect. The auditor need not explain why a change from one generally accepted
accounting principle to another is justified.
Choice "b" is incorrect. The paragraph should not identify the cumulative effect of the change on
the audited financial statements.
Choice "c" is incorrect. The auditor should never explicitly state concurrence with a change. If
the auditor opposes the change, a qualified or adverse opinion should be issued.
QUESTION: 50
Green, CPA, was engaged to audit the financial statements of Essex Co. after its fiscal year had
ended. The timing of Green's appointment as auditor and the start of fieldwork made
confirmation of accounts receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the reasonableness of the
account balances. Green's auditor's report most likely contained a(an):
https://Free-Braindumps.com

Free AICPA CPA-Auditing Exam Braindumps (page: 23)

CPA-Auditing Exam Discussions & Posts