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AUD Prep

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Question:

FYI: A disclaimer is issued when the scope limitations pertaining to the audit are so pervasive that the auditor in unable to express an opinion. Circumstances Resulting in a Scope Limitation (1) Circumstances Beyond the Control of the Entity—For example, the entity's accounting records have been destroyed. (2) Circumstances Related to the Nature or Timing of the Auditor's Work—For example, the auditor determines that substantive procedures alone are not sufficient and the entity's controls are ineffective; the auditor is unable to obtain audited financial statements of an investee (accounted for using the equity method); or the timing of the auditor's appointment does not permit the auditor to observe the physical counting of inventories. (3) Limitations Imposed by Management—For example, management prevents the auditor from requesting external confirmation of certain account balances. The auditor should request that management remove any such limitation. (a) If management refuses—The auditor should communicate the matter to those charged with governance and determine whether it is possible to perform alternative procedures to obtain sufficient appropriate audit evidence. (b) If unable to obtain sufficient appropriate audit evidence (and if the effects could be both material and pervasive)—The auditor should withdraw from the audit (when practicable) or issue a disclaimer of opinion.

Author: Monique Tyler



Answer:

FYI: “Auditor’s Responsibilities” section—Provide a limited description consisting of 3 sentences (without any bullet points), including a reference to the “Basis for Disclaimer of Opinion” section. When disclaiming an opinion on the entity’s financial statements—The auditor is prohibited from including an “Other Information” section in the auditor’s report; likewise, the auditor cannot communicate key audit matters when disclaiming an opinion.


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