Discuss AICPA CPA-Auditing Exam Topic 2 Question 102

During an engagement to review the financial statements of a nonissuer an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:

AExpress negative assurance on the accounting principles that do not conform with GAAP.

BDisclose the departure from GAAP in a separate paragraph of the report.

CIssue an adverse or an 'except for' qualified opinion, depending on materiality.

DExpress positive assurance on the accounting principles that conform with GAAP.

Suggested Answer: B

Choice 'b' is correct. Any report issued on significant deficiencies should indicate that providing assurance on internal control was not the purpose of the audit.

Choice 'a' is incorrect. The auditor should communicate significant deficiencies to management and those charged with governance, but is not required to request a meeting with management one level above the source of the reportable conditions, to discuss suggestions for remedial action.

Choice 'c' is incorrect. Significant deficiencies discovered and communicated at an interim date do not need to be reexamined with tests of controls before completing the engagement.

Choice 'd' is incorrect. Suggestions concerning administration efficiencies and business strategies may be communicated in the same report with significant deficiencies (the significant deficiencies must be separately identified, however).

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29 comments · newest first

Lamonica 10 months ago

B is the way to go, transparency is key!

Jacinta 11 months ago

A is not right, negative assurance doesn't fit here.

Christiane 11 months ago

Surprised this isn't more straightforward, but I guess it's tricky!

Corazon 11 months ago

I think C makes more sense, depending on the situation.

Ben 11 months ago

Definitely B, gotta disclose that departure!

Brett 12 months ago

I feel like expressing negative assurance isn’t the right approach here; it seems more like we need to highlight the departure instead.

Evangelina 12 months ago

I’m leaning towards option C, but I’m a bit confused about when to issue an adverse opinion versus a qualified one.

Edmond 12 months ago

I think option B sounds familiar because we practiced writing reports that included separate paragraphs for departures.

Isidra 1 year ago

I remember we discussed how to handle departures from GAAP in our review class, but I'm not sure if it's a qualified opinion or just a disclosure.

Bette 1 year ago

This is a good one. The key is that the accountant has identified a material departure from GAAP, and the client won't revise the financial statements. So the accountant needs to modify the standard review report, which means issuing an adverse or qualified opinion. Option C is the way to go.

Deeanna 1 year ago

I'm a bit confused by the options here. Expressing negative assurance or positive assurance doesn't seem quite right, since the issue is a material departure from GAAP. I think I need to re-read the question and the options more carefully.

Dean 1 year ago

Okay, I've got this. Since the accountant has identified a material departure from GAAP, the appropriate response is to issue an adverse or qualified opinion, depending on the materiality. That's option C, so that's my answer.

Tamar 1 year ago

Hmm, I'm a little unsure about this one. The wording is a bit tricky, and I'm not totally clear on the difference between expressing negative assurance versus an adverse or qualified opinion. I'll need to think this through carefully.

Louis 1 year ago

This seems like a pretty straightforward question about modifying a review report. I think the key is to focus on the fact that the accountant has identified a material departure from GAAP, and the options are about how to handle that in the report.

Ngoc 1 year ago

Option E: Burn the books and start over. That's the only way to be sure there's no GAAP departure. Or, you know, just roll with it - who needs accounting rules anyway?

Brinda 1 year ago

Option A is tempting, but negative assurance? Really? That's like a doctor saying 'You're not healthy, but hey, at least you're not dead!'

Katina 1 year ago

Option D is just plain wrong. We can't express positive assurance on principles that don't conform to GAAP. That's like putting lipstick on a pig.

Howard 1 year ago

↳ replying to Katina

I agree, expressing positive assurance on non-GAAP principles doesn't make sense.

Breana 1 year ago

↳ replying to Katina

C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.

Heidy 1 year ago

↳ replying to Katina

B) Disclose the departure from GAAP in a separate paragraph of the report.

Fannie 1 year ago

↳ replying to Katina

A) Express negative assurance on the accounting principles that do not conform with GAAP.

Una 1 year ago

I'm leaning towards Option C. If the departure is material, we have to issue an adverse or qualified opinion. Anything less would be misleading.

Stephaine 1 year ago

Option B is the way to go. We need to be transparent about the GAAP departure, even if management is being stubborn.

Renay 1 year ago

↳ replying to Stephaine

C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.

Peggie 1 year ago

↳ replying to Stephaine

That's a good point. Transparency is key, even if management is resistant.

Annett 1 year ago

↳ replying to Stephaine

B) Disclose the departure from GAAP in a separate paragraph of the report.

Fletcher 1 year ago

I'm not sure about that. Wouldn't it be better to disclose the departure from GAAP in a separate paragraph of the report, like option B suggests?

Mollie 1 year ago

I agree with Nobuko. It makes sense to issue a qualified opinion when there is a material departure from GAAP.

Nobuko 1 year ago

I think the correct answer is C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.

AICPA CPA-Auditing Exam - Topic 2 Question 102 Discussion