Harris & Thompson were engaged to audit Smart Corp's comparative financial statements for the years ended December 31, Year 1 and Year 2. The Year 1 financial statements were presented in accordance with generally accepted accounting principles, but the Year 2 financial statements were determined to be materially misstated. As a result, Harris & Thompson should
A)issue a qualified opinion on the comparative financial statements as a whole.
B)issue an unmodified opinion on the Year 1 financial statements and disclaim an opinion on the Year 2 financial statements.
C)issue an unmodified opinion on the Year 1 financial statements and a qualified opinion on the Year 2 financial statements.
D)reissue the previous opinion on the Year 1 financial statements and withdraw from the engagement.

Question

Quizplus · Accepted Answer

Harris & Thompson should issue an unmodified opinion on the Year 1 financial statements as they are correct and in accordance with generally accepted accounting principles. However, they should issue a qualified opinion on the Year 2 financial statements due to the material misstatement. This would indicate that the Year 2 financial statements are not reliable, but the Year 1 financial statements are.

Harris & Thompson Were Engaged to Audit Smart Corp's Comparative