Question

A modification of the standard report is required for all of the following conditions except?

1) there is a restriction on the scope of the engagement
2) the presence of a material weakness at the end of the period
3) management has concluded that internal controls are effective
4) the auditor was not able to apply all the procedures necessary

Answer 1

When management concludes that internal controls are effective, this generally does not require a modification of the standard report. The evaluator in the mini-case study maintained the integrity of the evaluation under ethical pressure.

Step-by-step explanation:

A modification of the standard report is required for certain conditions when conducting an audit or preparing an evaluation report. These conditions may include scenarios such as a restriction on the scope of the engagement, or the presence of a material weakness. However, when management has concluded that internal controls are effective, this would typically not necessitate a modification of the standard report. Modifications are generally required when there are concerns or limitations that impact the evaluator’s report.

In the provided mini-case study, ethical difficulties related to the independence of the evaluation process and the potential misrepresentation of data were faced. The evaluator chose to maintain the integrity of the evaluation by submitting a hard copy of the report to prevent unauthorized alterations.