6.05 - FRAMEWORK FOR REPORTING Flashcards
6.05 - FRAMEWORKS FOR REPORTING
In a situation where there is a justified
departure from a promulgated accounting principle that is adequately disclosed, how will the auditor modify the standard report?
A) By modifying the Auditor’s Responsibility paragraph.
B) By adding an other-matter paragraph after the opinion paragraph.
C) By modifying the Management’s Responsibility paragraph.
D) By adding an emphasis-of-matter paragraph after the opinion paragraph.
D) By adding an emphasis-of-matter paragraph after the opinion paragraph.
When a departure from a promulgated accounting principle is justified because following the principle would result in
misleading financial statements, the financial statements would be considered fairly stated and the auditor would issue an unmodified opinion.
The auditor will, however, draw attention to the departure by including an emphasis-of-matter paragraph.
Neither the auditor’s responsibilities nor management’s responsibilities are affected and neither paragraph would be modified.
An other-matter paragraph is used to provide information that is not required to be reported or disclosed in the financial
statements that will enhance users’ understandings of the audit or the audit report, not to draw attention to an item that is properly accounted for and disclosed.
6.05 - FRAMEWORKS FOR REPORTING
When there has been a change in accounting principles, but the effect
of the change on the comparability of the
financial statements is not material, the auditor should
Explicitly concur that the change is preferred.
Refer to the change in an explanatory paragraph.
Refer to the change in the opinion paragraph.
Not refer to consistency in the auditor’s report.
Not refer to consistency in the auditor’s report.
EXPLANATION:
The auditor would only modify the report for events and transactions having a material effect on the financial statements presented and would, therefore, not modify the report for immaterial changes in accounting principles.
