8.02 - SPECIAL REPORTS Flashcards
8.02 - SPECIAL REPORTS
An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements.
Under these circumstances, the report on the selected data should…
Indicate that the data are subject to prospective results that may notbe achieved.
Restrict the use of the report to those specified users within the entity.
State that the presentation is a comprehensive basis of accounting other than GAAP.
Be limited to data derived from the entity’s audited financial statements.
Be limited to data derived from the entity’s audited financial statements.
EXPLANATION:
A report on selected data is not an engagement separate from an audit.
Instead it is a service that is made possible as result of the audit and would only apply to information that is derived from the same data that the financial statements are derived from as that is what the auditor has applied procedures to.
The information is presumably prepared using the same basis of accounting as is applied in the financial statements.
The report is not required to be restricted.
An indication that prospective results may not be achieved is included in a report on prospective financial statements but not on selected financial data.
8.02 - SPECIAL REPORTS
When an auditor reports on financial
statements prepared on an entity’s income tax basis, the auditor’s report
should…
State that the basis of accounting is described in a footnote in the Financial Statements.
Not express an opinion on whether the statements are presented in conformity with the comprehensive basis of accounting used.
Include an explanation of how the results of operations differ from the cash receipts and disbursements basis of accounting.
Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards
State that the basis of accounting is described in a footnote in the Financial Statements.
EXPLANATION:
An auditor may accept an engagement to express an opinion on financial statements prepared in conformity with a comprehensive basis of accounting other than GAAP, referred to as a special purpose framework.
If there are no scope limitations, the auditor will express an opinion and a disclaimer is not required. The opinion will indicate whether the financial statements were presented fairly in conformity with the comprehensive basis of accounting under which they were prepared.
The entity will provide an explanation of how the comprehensive basis of accounting differs from GAAP, not the auditor, although the auditor will generally refer to the entity’s footnote in an emphasis-of-a-matter paragraph.
The auditor will state that the basis of accounting is described in a footnote to the financial statements.
8.02 - SPECIAL REPORTS
Which of the following titles would be considered suitable for financial statements that are prepared on a cash
basis?
Income statement.
Statement of operations.
Statement of cash flows.
Statement of revenues collected and expenses paid.
Statement of revenues collected and expenses paid.
EXPLANATION
The title “Statement of revenues collected and expenses paid” clearly indicates what is included in the financial statement and would be appropriate for a statement prepared under an OCBOA such as the cash basis.
Titles like “Income statement”, “Statement of operations”, and “Statement of cash flows” would be confused with statements prepared in conformity with GAAP.
8.02 - SPECIAL REPORTS
If the prescribed Audit Report form of a government agency on behalf of the client differs significantly from Generally Accepted Auditing Standards (GAAS), the auditor may:
I. Replace the form with a more acceptable form in compliance with GAAS
II. Reword the prescribed form and sign it
III. Choose not to accept the audit engagement
III only
II and III only
I, II, and III
I only
II and III only
EXPLANATION
If the prescribed Audit Report form of a government agency on behalf of the client differs significantly from GAAS, the auditor may reword the prescribed form and sign it, attach a separate audit report to the form, or choose not to accept the audit engagement.
The auditor may not replace the form.
