What does scope limitation mean on the CPA exam?
Scope limitation. Anything that stops the auditor obtaining evidence they judged necessary, whether imposed by the client or by circumstance. It leads to a qualified opinion, or a disclaimer when the possible effect is pervasive.
Defined against AU-C 705.09.
Which CPA exam sections use scope limitation?
Scope limitation appears in the AUD section of the CPA exam.
Other terms defined against AU-C 705
- adverse opinion: The opinion given when misstatements are both material and pervasive, so the statements are not fair at all.
- disclaimer of opinion: The auditor states that no opinion is expressed, because they could not get evidence and the possible effect is pervasive.
- qualified opinion: The opinion given when a misstatement is material but not pervasive, or when evidence the auditor could not obtain would have been.
- qualified or adverse: The two modified opinions used when the auditor has the evidence but disagrees with the statements: qualified when the effect is material, adverse when it is also pervasive.
Related terms
- written representations: Statements the auditor requires from management to confirm matters or support other evidence.
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
- audit evidence: Everything the auditor uses to reach a conclusion, including the accounting records and anything corroborating them.
- audit committee: A subcommittee of the board of directors that oversees financial reporting and the external audit.