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question on internal question


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#1 woogiboogi

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Posted 20 January 2014 - 01:23 PM

here is the question that i'm a bit confused-using Yaeger btw:

 

Q. a material weakness that exist at year-end may result in what type of audit opinion when conducting an audit of public company 's internal control?

 

i'm suppose to choose combination of  

A. Qualifed

B. Adverse

 

i chose both qualified and adverse but the answer says adverse only. can someone tell me why this is the case?  thanks.



#2 Hema

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Posted 20 January 2014 - 05:36 PM

@ Woogiboogi - I will try to explain this. You may refer to other sources as well...

 

A material weakness in Internal Control is very material (pervasive) GAAP problem, which leads to an adverse opinion. An adverse opinion is like a "yes" or "no" answer. [Either there is a material weakness or not. There is no "ifs" or "buts" after the "yes" or "no" answer]. In other words, there is no "except for"...

 

A qualified opinion, on the other hand, has "except for", where as, an adverse opinion is a straight forward answer. 

Hence, the correct answer is "B" [an "adverse" opinion] only, for this question.

Hope this helps!

Hema



#3 woogiboogi

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Posted 21 January 2014 - 10:40 AM

@Hema thanks it clarified my question :)