ExpertHard1 markMultiple Choice
CPA · Question 46 · Area IV: Reporting
An auditor is performing an integrated audit of an issuer. The auditor identifies a material weakness in internal control over financial reporting. The client remediates the weakness 20 days before year-end. The auditor tests the remediated control and finds it effective. What is the appropriate opinion on internal control?
An auditor is performing an integrated audit of an issuer. The auditor identifies a material weakness in internal control over financial reporting. The client remediates the weakness 20 days before year-end. The auditor tests the remediated control and finds it effective. What is the appropriate opinion on internal control?
Answer options:
A.
Unqualified Opinion.
B.
Adverse Opinion.
C.
Qualified Opinion.
D.
Disclaimer of Opinion.
How to approach this question
Remediation requires TIME. If fixed too late to test sufficiently, the MW stands at year-end -> Adverse.
Full Answer
B.Adverse Opinion.✓ Correct
To issue an unqualified opinion, the control must be operating effectively as of the balance sheet date. If a MW is remediated shortly before year-end, the auditor typically does not have enough evidence of its operating effectiveness over a sufficient period. Therefore, the MW is considered to still exist for reporting purposes.
Common mistakes
Thinking 'it's fixed so it's fine'.
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