financial statements covered by the principal auditor's opinion.
D. The principal auditor is unable to be satisfied as to the independence and professional
reputation of the other auditor.

Answer(s): A
Explanation:
Choice "a" is correct. When the principal auditor assumes responsibility for the other auditor's
work, the principal auditor would not mention the other auditor in his audit report (opinion). The
principal auditor would generally assume responsibility after reviewing the audit documentation
of the other auditor and performing supplemental audit tests, or by reputation, e.g., if the other
auditor is a correspondent (foreign) firm in which the principal auditor has developed
confidence. Choices "b" and "c" are incorrect. When the principal auditor finds it impractical to
review the other auditor's work, or when the FS audited by the other auditor are material, it is
more likely that the principal auditor wil divide responsibility and make reference to the other
auditor. Choice "d" is incorrect. The principal auditor should always make inquiries regarding the
independence and professional reputation of the other auditor. Inability to become satisfied in
this regard would constitute a scope limitation, resulting in a qualified opinion or disclaimer of
opinion. In either of these scenarios, it is likely that the other auditor would be mentioned within
an explanatory paragraph.
QUESTION: 63
In which of the following situations would an auditor ordinarily issue an unqualified audit opinion
without an explanatory paragraph?

A. The auditor wishes to emphasize that the entity had significant related party transactions.
B. The auditor decides to make reference to the report of another auditor as a basis, in part, for
the auditor's opinion.
C. The entity issues financial statements that present financial position and results of
operations, but omits the statement of cash flows.
D. The auditor has substantial doubt about the entity's ability to continue as a going concern,
but the circumstances are fully disclosed in the financial statements.

Answer(s): B
Explanation:
Choice "b" is correct. An auditor would generally issue an unqualified audit opinion without an
explanatory paragraph when the auditor decides to make reference to the report of another
auditor as a basis, in part, for the auditor's opinion. The auditor would modify his/her report (all
three paragraphs), but would not add an explanatory paragraph. Choices "a" and "d" are
incorrect. An auditor ordinarily would issue an unqualified opinion with an explanatory paragraph
if he or she wishes to emphasize that the entity had significant related party transactions, or if
the auditor has substantial doubt about the entity's ability to continue as a going concern (even
if the circumstances are fully disclosed in the financial statements). Choice "c" is incorrect. If the
entity issues financial statements that present financial position and results of operations but
omit the statement of cash flows, the opinion wil be qualified.
QUESTION: 64
When there has been a change in accounting principle that material y affects the comparability
of the comparative financial statements presented and the auditor concurs with the change, the
auditor should:

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