Final Exam

Answer The Following Questions:

1. How does the auditor’s opinion differ between scope limitations caused by client restrictions and limitations resulting from conditions beyond the client’s control? Under which of these two will the auditor be most likely to issue a disclaimer of opinion? Explain.

2. Identify the three alternative opinions that may be appropriate when the client’s financial statements are not in accordance with GAAP. Under what circumstance is each appropriate?

3. Explain how the rules concerning stock ownership apply to partners and professional staff. Give an example of when stock ownership would be prohibited for each.

4. After accepting an engagement, a CPA discovers that the client’s industry is more technical than he realized and that he is not competent in certain areas of the operation. What are the CPA’s options?

5. Distinguish between the auditor’s potential liability to the client, liability to third parties under common law, civil liability under the securities laws, and criminal liability. Describe one situation for each type of liability in which the auditor can be held legally responsible.

Best Wishes