A is corrent because when management refuses to furnish a representation letter, the scope of the auditor’s examination has been limited sufficiently to preclude an unmodified opinion.
B is incorrect because if direct confirmation of accounts receivable is not feasible, alternative procedures should be employed to obtain adequate evidence necessary to satisfy the auditor as to the receivables. The availability of alternative procedures to obtain adequate evidence determines whether a limitation of scope exists. Therefore, the inability to directly confirm receivables may or may not result in a scope limitation which precludes an unmodified opinion.
C is incorrect because the professional standards indicate that a CPA may accept an audit engagement after year-end and still issue an unmodified opinion. In this situation, another physical inventory could be taken which the auditor can observe, or the audit limitation could be remedied in some other manner.
D is incorrect because an engagement where the auditor reports only on the balance sheet is a limitation of reporting objectives rather than a limitation of scope, as long as there is no restriction on the auditor’s access to information.
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