Reference no: EM131619073

Question: Scope Limitations. Situations in which auditors are unable to obtain sufficient appropriate evidence necessary to support their opinion on the entity's financial statements are referred to as scope limitations.

Required: a. Distinguish between client-imposed scope limitations and circumstance-imposed scope limitations. Which of these is generally of more concern to auditors?

b. Why do scope limitations impact the auditors' ability to express an opinion on the entity's financial statements?

c. Assume that a circumstance-imposed scope limitation prevented auditors from performing procedures they considered to be necessary. How would each of the following factors independently influence the opinion expressed on the entity's financial statements?

1. The account balances affected by the scope limitation are not material to the entity's financial position, results of operations, or cash flows.

2. The account balances affected by the scope limitation are material to the entity's financial position, results of operations, and cash flows. However, the auditors are able to perform alternative procedures that provide evidence supporting the accounts affected by the scope limitation.

3. The account balances affected by the scope limitation are material to the entity's financial position, results of operations, and cash flows. Because of a lack of supporting documentation and key accounting records, auditors are unable to perform alternative procedures that provide evidence supporting the accounts affected by the scope limitation. d. For each of the situations in (c), briefly describe how the auditors' report on the entity's financial statements would be affected. (Do not rewrite or draft the report that would be issued in each of these circumstances.)