Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?
|a) Restrictions the client imposed|
b) Reliance on the report of other auditor
c) Inability to obtain sufficient appropriate evidential matter
d) Inadequacy of accounting records
The Correct Answer Is:
b) Reliance on the report of other auditor
Let’s break down the options and explain why each may or may not lead to a qualification of the auditor’s opinion due to a scope limitation, focusing on the correct answer and then addressing the other options:
Correct Answer Explanation :
b) Reliance on the report of other auditor:
This option doesn’t typically lead to a scope limitation that results in a qualification of the auditor’s opinion. Auditors often rely on the work of other auditors when dealing with components or subsidiaries of an entity.
However, this reliance doesn’t necessarily create a scope limitation unless the primary auditor is unable to evaluate the work of the other auditor adequately. In such cases, the primary auditor might issue a qualified opinion due to the limitation in their assessment of the other auditor’s work.
Nonetheless, this scenario isn’t automatically a scope limitation unless it impedes the primary auditor’s ability to form an opinion.
When auditors rely on the report of another auditor, they are essentially extending their procedures to cover components or subsidiaries of an entity. However, while this reliance is common in complex organizational structures, it doesn’t inherently limit the scope of the audit.
The key here lies in the primary auditor’s ability to assess the work of the other auditor adequately. If the primary auditor can effectively evaluate and integrate the work of the other auditor into their assessment without encountering significant limitations, it may not result in a scope limitation that leads to a qualification of the opinion.
However, if the primary auditor faces constraints in assessing or corroborating the other auditor’s findings, it could potentially lead to a qualification due to a limitation in scope.
Why the Other Options are not Correct:
a) Restrictions the client imposed:
When a client imposes restrictions that significantly limit the scope of the audit, it could lead to a scope limitation. However, not all client-imposed restrictions result in a qualification of the auditor’s opinion.
For instance, if a client restricts access to certain areas of their business due to sensitive information or security reasons but the auditor can obtain sufficient evidence through alternative means, it may not lead to a qualification. The impact of the restriction on the audit process determines whether it constitutes a scope limitation.
c) Inability to obtain sufficient appropriate evidential matter:
This situation often leads to a scope limitation and could result in a qualified opinion. If the auditor cannot gather enough evidence to support their conclusions, it undermines their ability to form an opinion on the financial statements.
However, this doesn’t automatically qualify as a scope limitation; sometimes, despite diligent efforts, the evidence available might be insufficient due to various reasons like inherent limitations in the audit process or circumstances beyond the auditor’s control.
d) Inadequacy of accounting records:
Auditors rely on accounting records to perform their audit procedures. If the records provided by the client are inadequate or insufficient, it could hinder the auditor’s ability to assess the financial statements accurately.
An inadequacy in accounting records might result in a qualified opinion if it prevents the auditor from obtaining necessary information or if the records are materially misstated, leading to uncertainties about the financial position of the entity.
In summary, the key to understanding a scope limitation lies in how the situation affects the auditor’s ability to perform their duties and form an opinion on the financial statements.
While reliance on another auditor’s report might not automatically result in a scope limitation, other factors such as restrictions imposed by the client, insufficient evidence, or inadequate accounting records could potentially lead to a scope limitation and consequently impact the auditor’s opinion.
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