A. Unqualified opinion.
B. Unqualified opinion with an explanatory paragraph.
C. Qualified opinion due to a scope limitation.
D. Qualified opinion due to a departure from generally accepted auditing standards.

Answer(s): A
Explanation:
Choice "a" is correct. There is a presumption that the auditor wil request the confirmation of
accounts receivable during an audit unless accounts receivable are immaterial, the use of
confirmations would be ineffective, or the assessed inherent risk is so low that the evidence
expected to be provided by analytical procedures or other substantive tests of details would be
sufficient. In this example, the confirmation of accounts receivable by direct communication with
the debtors would be ineffective. If Green was able to apply alternative audit procedures and
was satisfied as to the reasonableness of the account balances, then an unqualified opinion
could be issued.
Choice "b" is incorrect. Since Green was satisfied as far as the accounts receivable balances,
there is no need to add an explanatory paragraph.
Choice "c" is incorrect. Since Green was able to perform alternative procedures and was
satisfied as far as the reasonableness of the account balances, there is no scope limitation.
Choice "d" is incorrect. Since Green was able to perform alternative procedures and was
satisfied as far as the reasonableness of the account balances, there is no departure from
generally accepted auditing standards.
QUESTION: 51
Davis, CPA, believes there is substantial doubt about the ability of Hil Co. to continue as a
going concern for a reasonable period of time. In evaluating Hil 's plans for dealing with the
adverse effects of future conditions and events, Davis most likely would consider, as a
mitigating factor, Hil 's plans to:

A. Accelerate research and development projects related to future products.
B. Accumulate treasury stock at prices favorable to Hil 's historic price range.
C. Purchase equipment and production facilities currently being leased.
D. Negotiate reductions in required dividends being paid on preferred stock.

Answer(s): D
Explanation:
Choice "d" is correct. Negotiating reductions in required dividends would conserve cash, which
would be a mitigating factor in Davis' concerns about Hil 's ability to continue as a going
concern. Choice "a" is incorrect. Accelerating R&D projects would use cash and impair the
company's ability to continue as a going concern.
Choice "b" is incorrect. Accumulating treasury stock would consume cash and aggravate the
situation. Choice "c" is incorrect. Purchasing equipment that is currently leased would use cash
and impair the company further.
QUESTION: 52
In the auditor's report, the principal auditor decides not to make reference to another CPA who
audited a client's subsidiary. The principal auditor could justify this decision if, among other
requirements, the principal auditor:
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