Exam CPA Auditing and Attestation topic 1 question 92 discussion

Actual exam question from Test Prep's CPA Auditing and Attestation

Question #: 92
Topic #: 1

[All CPA Auditing and Attestation Questions]

On March 15, X4, Kent, CPA, issued an unqualified opinion on a client's audited financial statements for the year ended December 31, X3. On May 4, X4, Kent's internal inspection program disclosed that engagement personnel failed to observe the client's physical inventory. Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If the stockholders are currently relying on the opinion, Kent should first:

A. Advise management to disclose to the stockholders that Kent's unqualified opinion should not be relied on.
B. Undertake to apply alternative procedures that would provide a satisfactory basis for the unqualified opinion.
C. Reissue the auditor's report and add an explanatory paragraph describing the departure from generally accepted auditing standards.
D. Compensate for the omitted procedure by performing tests of controls to reduce audit risk to a sufficiently low level.

Show Suggested Answer

Suggested Answer: B 🗳️
Choice "b" is correct. In the event of omitted audit procedures, the auditor should first attempt to perform alternative procedures in order to ascertain whether the original opinion can be relied upon.
Choice "a" is incorrect. The auditor would only advise the client to notify all stockholders and other financial statement users that the unqualified opinion cannot be relied upon if the auditor cannot satisfy himself (with alternative procedures) as to the propriety of the original opinion.
Choice "c" is incorrect. The auditor may need to reissue the audit report if the auditor is unable to satisfy himself using alternative procedures; the opinion issued should be qualified or disclaimed, due to the scope limitation.
Choice "d" is incorrect. Tests of controls are not appropriate alternative procedures.

by gemazyni at April 5, 2025, 5:45 p.m.

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