Why isn't this a piecemeal opinion?

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  • #2688966
    Kairos
    Participant

    The answer is B) but can someone explain why this isn’t a piecemeal opinion? I only know the rationale and answer from having come across the question a couple of times but don’t understand the difference between this situation and a piecemeal opinion.

    Park, CPA, was engaged to audit the financial statements of Tech Co., a new client, for the year ended December 31, 20X1. Park obtained sufficient appropriate audit evidence for all of Tech’s financial statement items, except Tech’s opening inventory. Due to inadequate financial records, Park could not verify Tech’s January 1, 20X1, inventory balances. Park’s opinion on Tech’s 20X1 financial statements most likely will be:

    A.
    a disclaimer opinion issued on both the balance sheet and the income statement.

    Correct B.
    an unmodified opinion issued on the balance sheet and a disclaimer opinion issued on the income statement.

    C.
    a disclaimer opinion issued on the balance sheet and an adverse opinion issued on the income statement.

    D.
    an unmodified opinion issued on the balance sheet and an adverse opinion issued on the income statement.

    Explanation: “When the beginning inventory balance cannot be verified (due to a scope limitation) and sufficient appropriate audit evidence is obtained for all other financial statement items, unmodified and disclaimer opinions are issued on the balance sheet and income statement, respectively. The only effect of a potentially materially misstated beginning inventory balance would be on the income statement (i.e., cost of sales); therefore, a disclaimer of opinion is appropriate.”

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  • #2689197
    Cobalt60
    Participant

    I think because it is the whole balance sheet rather than individual items on the balance sheet it is ok to issue an unmodified opinion. It would be different if say the ending accounts receivable could not be verified. So individual accounts, no, but individual statements, yes?

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    #2691354
    Kairos
    Participant

    Yeah, seems about right looking at the textbook.

    Thank for the response!

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