Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records

Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Cravens has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Cravens will probably 

A. Decline the engagement.
B. Express an unqualified/unmodified opinion on the balance sheet and income statement except for inventory.
C. Issue a disclaimer of opinion.
D. Issue an adverse opinion.


Answer: Issue a disclaimer of opinion.

When there has been a change in accounting principle that materially affects the comparability of the comparative financial statements presented for a public company and the auditor concurs with the change, the auditor should

A. A.
B. B.
C. C.
D. D.


Answer: A

In the first audit of an entity, because of the entity's record retention policies, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. If the amounts in question could materially affect current operating results, the auditor would 

A. Be unable to express an opinion on the current year's results of operations and cash flows.
B. Express a qualified opinion on the financial statements because of a client-imposed scope limitation.
C. Withdraw from the engagement and refuse to be associated with the financial statements.
D. Specifically state that the financial statements are not comparable to the prior year because of an uncertainty.


Answer: Be unable to express an opinion on the current year's results of operations and cash flows.