Chapter 12 Auditing

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a.In this situation, scope limitation on accounts receivable audit is created because auditors are unable to obtain sufficient appropriate evidence using alternative procedures. Thus, if the amounts of wrong account receivables are material but not pervasive, the auditor can issue qualified opinion. If the scope limitation if pervasive, meaning the amounts of this prohibition are very large, the auditor should issue disclaimer of opinion. When the amounts involved are immaterial, the auditor can issue unqualified report. b.In this case, the entity failed to record the revenue, thus it is considered departure from GAAP. If this departure is material and pervasive to financial statements, the auditor should issue adverse opinion. If this failure to record the revenue is material but not pervasive, the auditor can issue qualified opinion. If this departure is immaterial, unqualified opinion can be expressed. c.Not capitalization of leases is considered as departure from GAAP. If the amounts of capitalization are material but not pervasive to financial statements, the qualified opinion can be issued. If these amounts are material and pervasive, the auditors should express adverse opinion. d.This case is about going-concern uncertainty on the amount of damage. If auditor thinks the amount of award seriously threaten the going-concern status of the company, they should issue disclaimer of opinion with the auditor’s report providing all substantive reasons for the disclaimer. The auditor should issue a qualified or adverse opinion when the entity does not properly disclose matters related to unrecorded loss. Even they can issue unqualified opinion with the explanatory paragraph following the opinion paragraph that directs users’ attention to management’s disclosure about going-concern uncertainty. 12.40

Scenario A: In this case, Pathway’s...
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