CPA 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.What type of audit report should be issued?
A)Adverse.
B)A GAAP qualification.
C)A scope qualification.
D)Disclaimer or denial

Question

Quizplus · Accepted Answer

A GAAP qualification is appropriate because the company has failed to disclose significant information in its financial statements, which is a departure from Generally Accepted Accounting Principles (GAAP). Disclosure of lawsuits is required under GAAP, and failure to do so affects the financial statement's completeness and reliability.

CPA Has Been Engaged to Audit the Financial Statements of Marchano