QUESTION: 68
An auditor should disclose the substantive reasons for expressing an adverse opinion in an
explanatory paragraph:

A. Preceding the scope paragraph.
B. Preceding the opinion paragraph.
C. Fol owing the opinion paragraph.
D. Within the notes to the financial statements.

Answer(s): B
Explanation:
Choice "b" is correct. The auditor should disclose the substantive reasons for expressing an
adverse opinion in a separate explanatory paragraph preceding the opinion paragraph. Choice
"a" is incorrect. There are no circumstances where an explanatory paragraph precedes the
scope paragraph.
Choice "c" is incorrect. The explanatory paragraph follows the opinion paragraph when there is
a change in accounting principle or when there is doubt as to going concern. Choice "d" is
incorrect. The auditor cannot include an explanatory paragraph in the financial statements,
which are the responsibility of management.
QUESTION: 69
When management does not provide reasonable justification that a change in accounting
principle is preferable and it presents comparative financial statements, the auditor should
express a qualified opinion:

A. Only in the year of the accounting principle change.
B. Each year that the financial statements initially reflecting the change are presented.
C. Each year until management changes back to the accounting principle formerly used.
D. Only if the change is to an accounting principle that is not generally accepted.

Answer(s): B
Explanation:
Choice "b" is correct. When management does not provide reasonable justification that a
change in accounting principle is preferable and it presents comparative FS, the auditor should
express a qualified opinion each year that the FS initially reflecting the change are presented.
Choices "a", "c", and "d" are incorrect, per the rule stated above.
QUESTION: 70
When an independent CPA is associated with the financial statements of a publicly held entity
but has not audited or reviewed such statements, the appropriate form of report to be issued
must include a(an):

A. Compilation report.
B. Disclaimer of opinion.
C. Unaudited association report.
D. Qualified opinion.
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