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The ultimate outcome of the litigation cannot presently be determined

The ultimate outcome of the litigation cannot presently be determined

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32. An explanatory paragraph following an opinion paragraph that describes an uncertainty follows: As discussed in Note X to the financial statements, the company is a defendant in a lawsuit alleging infringement of certain patent rights and claiming damages. What type of opinion should the auditor express in this circumstance? a. unqualified b. qualified c. disclaimer d. adverse 33. If an amendment to other information in a document containing audited financial statements is necessary and the entity refuses to make the amendment, the auditor would consider issuing: a. Qualified or adverse opinion c. Unqualified opinion with explanatory paragraph b. Qualified or disclaimer of opinion d. Unqualified opinion. 34. When management does not amend the financial statements in circumstances where the auditor believes they need to be amended and the auditor’s report has not been released to the entity, the auditor should express a. Qualified or adverse opinion c. Unqualified opinion with explanatory paragraph b. Qualified or disclaimer of opinion d. Unqualified opinion. 35. If subsequent to the issuance of the audited financial statements, the auditor becomes aware of material misstatements in the financial statements that exist prior to the date of the audit report, the auditor should a. Notify the parties who currently relying on the financial statements. b. Discuss the matter with management, and should take the action appropriate in the circumstances. c. Document such information in the audit plan for succeeding audit. d. Submit revised copies of the financial statements and audit report to the stockholders.

QUIZZERS 1. Which of the following is not explicitly included in the opening paragraph of an audit report? Identification of the financial statements that have been audited. A statement by the auditor that the audit provides a reasonable basis for the opinion. Statement that the financial statements are the responsibility of the entity’s management. Statement that the responsibility of the auditor is to express an opinion on the financial statements based on his audit. A measure of uniformity in the form and content of the auditor’s report is desirable because a. It helps the auditors avoid legal liability. It helps the readers understand the report. It helps the auditor identify the usual circumstances that are expected to occur. It makes the auditors more informed of their responsibilities with respect to audit report.

The most common type of audit report contains a(n): a. Adverse opinion. Disclaimer of opinion. Qualified opinion. Unqualified 4. If an auditor is certain an illegal act has a material effect on financial statements and the clients agrees to adjust the statements accordingly, the auditor should: a. Withdraw from the engagement. Disclaim an opinion on the financial statements taken as a whole. Issue a qualified opinion. Issue an unqualified opinion. It exists when other information contradicts information contained in the audited financial statements. Material misstatement of fact c. Material inconsistency b. Material error d. Material deviation 6. After issuing a report, a auditor has no longer obligation to make continuing inquiries or perform other procedures concerning the audited financial statements, unless a. Management of the entity requests the auditor to reissue the auditor’s report.

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Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements

Information about an event that occurred after the end of fieldwork comes to the auditor’s attention. Information, which existed at the report date and may affect the report, comes to the auditor’s attention. Final determinations or resolutions are made of contingencies that had been disclosed in the financial statements. Which of the following events occurring after the issuance of an auditor’s report most likely would cause the auditor to make further inquiries about the previously issued financial statements? A technological development that could affect the entity’s future ability to continue as a going concern. The entity’s sale of a subsidiary that accounts for 30 percent of the entity’s consolidated sales. The discovery of information regarding a contingency that existed before the financial statements were issued.