Chapter 18

A going concern issue requires an explanatory paragraph to be added to the standard unqualified audit report (public company).

• TRUE

• FALSE

An opinion based in part on the report of another auditor requires an explanatory/emphasis-of- matter paragraph be added to the standard unqualified audit report.

• TRUE

• FALSE

A basic assumption that underlies financial reporting is that an entity will continue as a going concern.

• TRUE

• FALSE

A change in accounting estimate is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

• TRUE

• FALSE

A correction of a material misstatement in previously issued financial statements is an example of an accounting change that affects comparability and requires an explanatory paragraph in the audit report.

• TRUE

• FALSE

Changes that affect comparability but that do not involve a change in accounting principle or the correction of a misstatement are normally disclosed in the footnotes but do not require an explanatory paragraph in the audit report.

• TRUE

• FALSE

An auditor may be unable to express an unqualified opinion if an immaterial departure from GAAP is present in the financial statements.

• TRUE

• FALSE

An auditor must disclaim an opinion when the auditor lacks independence.

• TRUE

• FALSE

The choice of which audit report to issue depends on the nature and the materiality of the condition giving rise to the departure.

• TRUE

• FALSE

A scope limitation results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.

• TRUE

• FALSE