[Anonymous]

Wiley Question –

Is the reasoning for the answer wrong? I thought that both would be NO because there is adequate disclosure of the going concern. I could see a “disclaimer of opinion” being issued if there were a scope limitation in assessing the company’s ability as a going concern. Please help!

An auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. If the entity’s disclosures concerning this matter are adequate, the audit report may include a(n)

Disclaimer of opinion Except for qualified opinion

A. Yes Yes

B. No No

C. No Yes

D. Yes No

A. A.

B. B.

C. C.

D. D.

The answer is:

Answer D is correct. A disclaimer of opinion may be appropriate but an “except for” qualified opinion is never appropriate when substantial doubt about an entity’s ability to continue as a going concern has been adequately disclosed.

Thanks in advance. Help would be appreciated!

[hopeful_cpa]

That is correct, as long as disclosure is made then there is no need for a disclaimer or an except for. If disclosure is not made, and it is extreme, then only a disclaimer would be appropriate.

I hope this helps!! =)

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Morganf]

This question is pretty straight forward and just requires you know your report modification reasons. If disclosures were not adequate, disclosure issue would be the prime concern which warrants either a Qualified or Adverse opinion. However, this is not the case and your 2 options for a going concern problem are (1) Unqualified with an explanatory paragraph or (2) disclaimer.

I wrote a nice summary of report modifications in a different thread: https://www.another71.com/cpa-exam-forum/topic/type-of-opinion-help

Hope that helps

BEC - 88
AUD - 69, 74, 93
FAR - 78
REG - 79

[yankeeaccountant]

@morganf

Great summary. Thanks for sharing! Good luck on your retake of Audit!

[Anonymous]

So the question is answered incorrectly, yes? Because it states that the going concern is “adequately disclosed” which means that it should be a unqualified-modified report. This was my reasoning. @Morganf- how would disclaimer be appropriate if it is adequately disclosed? Thanks for everyone's help ~

[Anonymous]

so, if the question states that disclosures are adequate. the usual answer is either disclaim or unqualified (depending on which choice you are given: either/or/both)? by including qualified/ adverse, they're trying to throw you off?

and, if disclosures are insufficient, does that mean the correct answer would be either qualified/adverse (again, depending on which choice you are given)?

[That Cartoon Mouse]

@another69 Right, if the disclosure is insufficient the its the same as inadequate disclosure, which is a departure from GAAP, so you issue a qualified opinion.

REG 82 (10/07/11)
BEC 88 (11/01/11)
FAR 86 (11/21/11)
AUD 82 (11/30/11)
----------
Roger CPA Review, live & cram course

[misanthrope87]

@CPASilv

My memory is a little fuzzy, but I think in the becker book, it mentions that you can choose to disclaim an opinion in a situation where there is a going concern issue when it is adequately disclosed, although, that would not typical.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[Anonymous]

Ah, okay. Must be that. In CPAexcel, they only mention unqualified with the explanatory paragraph.

[Morganf]

@yankeeaccountant Thanks! Re-taking it the 19th and it feels like it could go either way.

@ CPASilv. Both things you stated are wrong. “Adequately disclosed” does not mean “unqualified report.” “Adequately disclosed” means there is no disclosure issue. Going-Concern & disclosure are two completely separate issues. You should click the link i posted in my first response.

To answer “how would disclaimer be appropriate if it is adequately disclosed?”: That's just what a Going-Concern issue is; for a going-concern issue you have the option of an Unqualified w/ Explanatory Paragraph OR Disclaimer. Your decision between the two is (like most things in this profession) auditor judgement, which boils down to how severe you feel the issue is.

Your decision between Unqualified & Disclaimer has nothing to do with disclosures as it seems you think. To repeat, the only way disclosures affect this problem is that disclosures are a more severe problem than Going-Concern; if both happened to exist, disclosures would “trump” going-concern and your report opinion would be based on the disclosure issue: Qualified or Adverse opinion.

BEC - 88
AUD - 69, 74, 93
FAR - 78
REG - 79

[Anonymous]

Ahhhhh — okay. I understand now :)- thank you so much! And yes, good luck with your test. I'm doing mine on Wednesday.. Hoping for the best for us both.

[Author]

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