explanatory paragraph.
J. Issue the standard auditor's report without modification.

Answer(s): B
Explanation:
Choice "B" is the correct modification. Such changes should be described in an explanatory
paragraph following the opinion paragraph without modifying the three standard paragraphs.
QUESTION: 174
This question presents independent factual situations an auditor might encounter in conducting
an audit. List A represents the types of opinions the auditor ordinarily would issue. Select as the
best answer for this item, the action the auditor normally would take. The types of opinions in
List A may be selected once, more than once, or not at all.
Assume:
. The auditor is independent.
. The auditor previously expressed an unqualified opinion on the prior year's financial
statements. . Only single-year (not comparative) statements are presented for the current year.
. The conditions for an unqualified opinion exist unless contradicted in the factual situations. .
The conditions stated in the factual situations are material. . No report modifications are to be
made except in response to the factual situation.
Item to Be Answered
An entity is a defendant in a lawsuit alleging infringement of certain patent rights. However, the
ultimate outcome of the litigation cannot be reasonably estimated by management. The auditor
believes there is a reasonable possibility of a significantly material loss, but the lawsuit is
adequately disclosed in the notes to the financial statements.
List A
Types of Options

A. An "except for" qualified opinion.
B. An unqualified opinion.
C. An adverse opinion.
D. A disclaimer of opinion.
E. Either an "except for" qualified opinion or an adverse opinion.
F. Either a disclaimer of opinion or an "except for" qualified opinion.
G. Either an adverse opinion or a disclaimer of opinion.

Answer(s): B
Explanation:
Choice "B" is the correct opinion. Since the uncertainty is adequately disclosed, an unqualified
opinion should be issued.
QUESTION: 175
This question presents independent factual situations an auditor might encounter in conducting
an audit. List B represents the report modifications (if any) that would be necessary. Select as
the best answer for each item, the action the auditor normally would take. The report
modifications in List B may be selected once, more than once, or not at all.
Assume:
. The auditor is independent.
. The auditor previously expressed an unqualified opinion on the prior year's financial

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