Audit "report type" question

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  • #174007
    Isaac
    Participant

    I’m having trouble understanding this question from the Wiley Test Bank:

    Which auditor actions are possible when that auditory incurs a scope limitation relating to a public company engagement on whether a previously reported material weakness continues to exist?

    The two choices are “Disclaimer” and “Qualified”. And it’s one of those questions where you pick “yes-yes”, “yes-no”, and so forth.

    I feel that the correct answer is “Yes-Yes”. According to my understanding, you can issue an unqualified opinion for an immaterial scope limitation, a qualified opinion for a material scope limitation, and a disclaimer of opinion for a very-material scope limitation. So, in my mind, depending on the level of materiality, it could be a qualified opinion or a disclaimer opinion.

    What am I missing here? Thanks!

    FAR...80...Yaeger...Nov/2011
    AUD...Exam...Oct/2012
    REG
    BEC

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  • #376691
    jokami
    Member

    Ok… Let me see if I remember well my “opinion” rules…

    For scope limitations in your audit you can do three things: qualify your opinion, disclaim it or withdraw from the engagement.

    If you qualify it; it was whether there was some kind of uncertainty or you had some scope limitation and it was not minimal but you can still give an opinion about it

    If you disclaim it: it was because the uncertainty and the scope were very highly material or the auditor was not independent or the statements were not audited (reviewed)

    Now… They are asking here what happens when a material weakness continues to exists. I would choose:

    Yes – Disclaimer / No – Qualified

    The questions asks about a material weakness in the scope of the audit second year in a row. Which limits the auditor to fully complete his audit and submit an opinion which makes it an high material issue to work with and increases his audit risk. I would either disclaim my opinion or withdraw from the engagement. This last one if I feel the FS are false, fraudulent, misleading or deceptive.

    What did the book says the correct answer is?

    B - 62, 70, 72, 79!!!
    A - 68, 81
    R - 70, 82
    F - 84

    "The limit to your abilities is where you place them" - Fortune Cookies

    #376692
    jlitch07
    Participant

    I agree.

    PCAOB AS #4 states “The auditor may issue an opinion on whether a previously reported material weakness continues to exist only when there have been no restrictions on the scope of the auditor's work. Because of the scope of an engagement to report on whether a previously reported material weakness continues to exist, any limitations on the scope of the auditor's work require the auditor either to disclaim an opinion or to withdraw from the engagement. A qualified opinion is not permitted.”

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