12.24 EASY You are the auditor of a consolidated entity, a significant component of whose accounting...

12.24

EASY You are the auditor of a consolidated entity, a significant component of whose accounting records have been seized indefinitely by government authorities.

REQUIRED Indicate whether this circumstance will require a modification to the auditor’s opinion. Why?

Expert Solution

This cirsumstance will REQUIRE modification to the auditor's opinion.

This is because it fit into the following cirsumstances as given by GAAS.

As per GAAS,

The auditor should modify the opinion in the auditor's report when a. the auditor concludes that, based on the audit evidence obtained, the financial statements as a whole are materially misstated or

b. the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement.

The auditor should express a qualified opinion when a. the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material but not pervasive to the financial statements or b. the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.

The auditor should express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

The auditor should disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.

The auditor’s inability to obtain sufficient appropriate audit evidence (also referred to as a limitation on the scope of the audit) may arise from: (a) Circumstances beyond the control of the entity; (b) Circumstances relating to the nature or timing of the auditor’s work; or (c) Limitations imposed by management.

Examples of circumstances beyond the control of the entity include: • When the entity’s accounting records have been destroyed. • When the accounting records of a significant componenthave been seized indefinitely by governmental authorities.

Because of this, auditor is not able to obtain sufficient appropriate audit evidence to form an audit opinion.

ekkarill92 answered 1 year ago

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