Audits of Single F/S and specific elements, accounts, or items

Question 1

What is the impact on the auditor’s report when reporting on an incomplete presentation that is otherwise presented in accordance with GAAP?

Answer 1

The auditor should include an emphasis-of-matter paragraph that (1) states the purpose for which the presentation is prepared (and refers to a note in the financial statements that describes the basis of presentation) and (2) indicates that the presentation is not intended to be a complete presentation.

Question 2

What are the reporting requirements when the auditor has been engaged to audit a specific element of a financial statement in connection with an audit of the complete set of financial statements?

Answer 2

The auditor should (1) issue a separate report and express a separate opinion for each engagement; and (2) indicate in the report on a specific element of a financial statement the date and nature of the auditor’s report on the complete set of financial statements. (These separate reports may be published in the same document, if sufficiently differentiated.)

Question 3

When deciding whether to accept an engagement to report on financial statements prepared in accordance with a special-purpose framework, what three matters should the auditor consider?

Answer 3

1. )The purpose for which the single financial statement or specific element is prepared
2. )The intended users
3. )The steps taken by management to determine that the financial reporting framework is acceptable and that disclosure is adequate

Question 4

If a modified opinion on the set of financial statements is material and pervasive to the specific element, what is the effect on the separate report on the specific element?

Answer 4

The auditor should either: (1) express an adverse opinion on the specific element when the modification involves a misstatement; or (2) disclaim an opinion on the specific element when the modification involves a scope limitation.

Question 5

What is required when the auditor is engaged to report on a specific element that is based on (or derived from) the entity’s net income?

Answer 5

The auditor should obtain sufficient appropriate audit evidence to enable the auditor to express an opinion about both financial position and results of operations. (Effectively, this means that the auditor must audit the complete set of financial statements too.)