Question

Select the type of audit report the auditors generally should issue in the situations presented below. type of audit report may be used once, more than once, or not at all.

Answer 1

Disclaimer : Client ­imposed restrictions significantly limit the scope of the auditors’ procedures, and they are unable to obtain sufficient appropriate audit evidence. The possible effects onthe financial statements of undetected misstatements, if any, could be both material and pervasive.

Unmodified—standard: The auditors decide not to make reference to the report of a component auditor that audited a portion of group financial statements

Qualified: The auditors believe that the financial statements have been presented in conformity with generally accepted accounting principles in all respects, except that a loss contingency that should be disclosed through a note to the financial statements is not included. While they consider this a material omission, they do not believe that pervasively affects the financial statements

Unmodified—with an emphasis­of­matter paragraph -The client has changed from LIFO to FIFO for inventory valuation purposes; the auditors concur with this change. The effect is considered material to the financial statements,although inventory is not a large part of total assets.

Adverse. - The client has changed from LIFO to FIFO for inventory valuation purposes; the auditorsdo not concur with this change. The effect is considered material and pervasive