Lesson: Scope Limitations and Contingency Treatments

In this lesson, the focus is on scope limitations and contingency treatments. It begins by explaining the reasons and consequences of scope limitations in an audit engagement, such as management's refusal to furnish written representations. The discussion highlights that auditors may modify or disclaim their opinion, or even withdraw from the engagement in certain cases. However, a qualified opinion could also be appropriate based on specific circumstances. The lesson then shifts to contingency treatments, discussing uncertainties like lawsuits and the decision to accrue and/or disclose based on the probability of loss and whether it can be estimated. A helpful chart is provided to illustrate the different scenarios and how management should approach each situation. Lastly, the lesson outlines when an emphasis of matter paragraph should or should not be added in relation to uncertainties.