2. For each of the situations below, indicate, by letter, the type of report most likely...

2. For each of the situations below, indicate, by letter, the type of report most likely to be issued. (5 points)
A. Unqualified opinion, no modification.
B. Unqualified opinion, modification for consistency.
C. Unqualified opinion, modification for Rule 203.
D. Unqualified opinion, modification for emphasis of a matter.
E. Unqualified opinion, modification for a going-concern uncertainty.
F. Unqualified opinion, modification for going concern.
G. "Except for" qualified opinion.
___ 1. The entity has a lawsuit pending against them. There is significant uncertainty about the outcome of the lawsuit, which could have a significant impact on the viability of the entity. Management has provided adequate disclosure of the lawsuit in the footnotes accompanying the financial statements.
___ 2. The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has accrued the best estimate of the loss and provided adequate disclosure. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.
___ 3. The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has not accrued the best estimate of the loss, but has provided information in the footnotes. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.
___ 4. Based on recent analysis of usage, the entity has changed the useful life of its office equipment from five to four years. This change is reflected in the depreciation amounts computed for the current year.
___ 5. The entity uses an accounting principle for a class of transactions that is not acceptable under current GAAP. The entity believes, and the auditors concur, that the financial statements would be misleading if GAAP were to be followed

Solutions

Expert Solution

1	The entity has a lawsuit pending against them. There is significant uncertainty about the outcome of the lawsuit, which could have a significant impact on the viability of the entity. Management has provided adequate disclosure of the lawsuit in the footnotes accompanying the financial statements.	Except for" qualified opinion.
2	The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has accrued the best estimate of the loss and provided adequate disclosure. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern	Unqualified opinion, modification for a going-concern uncertainty or Unqualified opinion, modification for emphasis of a matter
3	The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has not accrued the best estimate of the loss, but has provided information in the footnotes. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.	Unqualified opinion, no modification
4	Based on recent analysis of usage, the entity has changed the useful life of its office equipment from five to four years. This change is reflected in the depreciation amounts computed for the current year.	Unqualified opinion, no modification
5	The entity uses an accounting principle for a class of transactions that is not acceptable under current GAAP. The entity believes, and the auditors concur, that the financial statements would be misleading if GAAP were to be followed.	Unqualified opinion, modification for Rule 203

ekkarill92 answered 7 months ago

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