apply alternative procedures to verify their balances.
D. The auditor is unable to determine the amounts associated with illegal acts committed by the
client's management.

Answer(s): A
Explanation:
Choice "a" is correct. The failure of the financial statements to contain adequate disclosure of
related party transactions, or other required disclosures, would result in a qualified or adverse
opinion, not a disclaimer of opinion.
Choice "b" is incorrect. A client's refusal to permit its attorney to furnish information requested in
a letter of audit inquiry would generally result in a disclaimer of opinion. Choice "c" is incorrect.
The auditor's inability to observe physical inventories or apply alternative procedures to verify
their balances could result in a disclaimer. Choice "d" is incorrect. The auditor's inability to
determine the amounts associated with illegal acts committed by the client's management could
result in a disclaimer.
QUESTION: 57
Green, CPA, concludes that there is substantial doubt about JKL Co.'s ability to continue as a
going concern. If JKL's financial statements adequately disclose its financial difficulties, Green's
auditor's report should:
A. Option A
B. Option B
C. Option C
D. Option D

Answer(s): A
Explanation:
Choice "a" is correct. "Yes - Yes - Yes."
When a CPA concludes that there is substantial doubt about an entity's ability to continue as a
going concern and the entity adequately discloses its financial difficulties, an unqualified opinion
is appropriate. An explanatory paragraph (following the opinion paragraph) should be used to
highlight the situation. This paragraph should include the phrases "substantial doubt" and "going
concern." Choices "b", "c", and "d" are incorrect, per above.
QUESTION: 58
An auditor may reasonably issue an "except for" qualified opinion for a(an):

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