Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the CPA Auditing and Attestation Exam. Leverage comprehensive materials, flashcards, and detailed explanations for each question. Master essential auditing concepts and techniques with confidence!

Start Multiple Choice Practice Test
Start Flash Cards

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

In which situation would an auditor typically issue an unmodified audit opinion without an emphasis-of-matter paragraph?

  1. The entity omits the statement of cash flows

  2. The auditor decides to reference the auditor of a component audit

  3. The auditor has substantial doubt about going concern

  4. The auditor wishes to emphasize significant related party transactions

The correct answer is: The auditor decides to reference the auditor of a component audit

An unmodified audit opinion indicates that the financial statements present a true and fair view in accordance with the applicable financial reporting framework, without any significant concerns that warrant extra emphasis or additional explanation. In the scenario where the auditor decides to reference the auditor of a component audit, it is often intended to provide additional context about the procedures performed on the components, while still concluding that the overall financial statements are fairly presented. In this case, the use of a reference to the component auditor is considered standard practice when the auditor has sufficient evidence regarding the component’s financial information. This situation does not inherently present significant issues with the financial statements that would necessitate an emphasis-of-matter paragraph. The auditor is simply acknowledging the work of another auditor and expressing reliance on that work, while still maintaining a clean opinion on the overall financial statements. Moreover, the other scenarios involve situations that typically would require additional emphasis in the auditor's report. For instance, omitting the statement of cash flows, having substantial doubt about going concern, or wanting to emphasize significant related party transactions indicate matters that could affect the users' understanding of the financial statements. Therefore, these situations would likely lead to a modified opinion or require emphasis-of-matter paragraphs, distinguishing them from the scenario of referencing a component

More Questions Like This