CA has been engaged to audit the financial statements of Marchano Ltd., a manufacturer of toys.Several individuals are suing the company because of a toy that injured children.The company has not disclosed the lawsuit in its financial statements.The type of audit report issued should be:
A)Adverse.
B)A GAAP qualification.
C)A scope qualification.
D)Disclaimer or denial

Question

Quizplus · Accepted Answer

The company has not disclosed a material lawsuit, which is a departure from GAAP, thus requiring a GAAP qualification in the audit report.

CA Has Been Engaged to Audit the Financial Statements of Marchano