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AICPA CPA-Auditing Exam - Topic 2 Question 102 Discussion

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:
B) Disclose the departure from GAAP in a separate paragraph of the report.
A) Express negative assurance on the accounting principles that do not conform with GAAP.
C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.
D) Express positive assurance on the accounting principles that conform with GAAP.

AICPA CPA-Auditing Exam - Topic 2 Question 102 Discussion

Actual exam question for AICPA's CPA-Auditing exam
Question #: 102
Topic #: 2
[All CPA-Auditing Questions]

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:

Show Suggested Answer Hide Answer
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).


by Amber at Oct 18, 2024, 10:36 PM

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Lamonica
7 months ago
B is the way to go, transparency is key!
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Jacinta
8 months ago
A is not right, negative assurance doesn't fit here.
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Christiane
8 months ago
Surprised this isn't more straightforward, but I guess it's tricky!
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Corazon
8 months ago
I think C makes more sense, depending on the situation.
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Ben
8 months ago
Definitely B, gotta disclose that departure!
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Brett
9 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.
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Evangelina
9 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.
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Edmond
9 months ago
I think option B sounds familiar because we practiced writing reports that included separate paragraphs for departures.
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Isidra
9 months 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.
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Bette
9 months 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.
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Deeanna
9 months 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.
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Dean
9 months 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.
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Tamar
9 months 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.
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Louis
9 months 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.
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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?
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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!'
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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.
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Howard
1 year ago
I agree, expressing positive assurance on non-GAAP principles doesn't make sense.
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Breana
1 year ago
C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.
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Heidy
1 year ago
B) Disclose the departure from GAAP in a separate paragraph of the report.
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Fannie
1 year ago
A) Express negative assurance on the accounting principles that do not conform with GAAP.
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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.
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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.
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Renay
1 year ago
C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.
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Peggie
1 year ago
That's a good point. Transparency is key, even if management is resistant.
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Annett
1 year ago
B) Disclose the departure from GAAP in a separate paragraph of the report.
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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?
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Mollie
1 year ago
I agree with Nobuko. It makes sense to issue a qualified opinion when there is a material departure from GAAP.
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Nobuko
1 year ago
I think the correct answer is C) Issue an adverse or an 'except for' qualified opinion, depending on materiality.
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