Question

T/F: The only unmodified opinion audit report that does not include an explanatory paragraph is when other auditors are involved. In this case only the introductory paragraph is modified.

Answer 1

An unmodified opinion audit report can include an explanatory paragraph for various reasons, not just when other auditors are involved. Both the introductory paragraph and the explanatory paragraph (if applicable) can be modified in an unmodified opinion audit report.

Step-by-step explanation:

The statement in the question is false. An unmodified opinion audit report can include an explanatory paragraph for various reasons, not just when other auditors are involved. For example, an explanatory paragraph may be included if the financial statements are prepared in accordance with a different accounting framework from the one used by the auditor, or if there is uncertainty about the company's ability to continue as a going concern.

Therefore, both the introductory paragraph and the explanatory paragraph (if applicable) can be modified in an unmodified opinion audit report. It's important to carefully review the specific circumstances and requirements of each audit to determine the necessary modifications to the audit report.

Answer 2

The statement is false because an unmodified opinion audit report may include explanatory paragraphs in various situations, not exclusively when other auditors are involved. The explanatory paragraph in an unmodified report could draw attention to matters such as emphasis on a particular matter or to highlight other matters the auditor considers necessary.

Step-by-step explanation:

True or False: The only unmodified opinion audit report that does not include an explanatory paragraph is when other auditors are involved. In this case, only the introductory paragraph is modified. This statement is false. An unmodified opinion, also known as an unqualified opinion, is the best type of report an auditee can receive from an external auditor and indicates that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Generally, this type of report does not include any explanatory paragraphs unless there is a need to draw attention to a matter appropriately presented or disclosed in the financial statements (emphasis of matter) or where the auditor finds it necessary to communicate a matter other than those presented or disclosed in the financial statements (other matter).

When other auditors are involved, and the principal auditor decides to make reference to the audit of the other auditor, the introductory paragraph is indeed modified to indicate that part of the audit was performed by other auditors. However, this is not the only time an unmodified report may include an explanatory paragraph— other instances involve going concern uncertainties, significant events, and changes in accounting policies among others.