AUD

AUD practice questions, page 38 of 41, with answer review and explanations.

Question 186

When an auditor reports on financial statements prepared on an entity's income tax basis, the auditor's report should:

  1. Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards.
  2. Not express an opinion on whether the statements are presented in conformity with the comprehensive basis of accounting used.
  3. Include an Explanation: of how the results of operations differ from the cash receipts and disbursements basis of accounting.
  4. State that the basis of presentation is a comprehensive basis of accounting other than GAAP.

Question 187

A CPA is permitted to accept a separate engagement (not in conjunction with an audit of financial statements) to audit an entity's:

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 188

Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta's auditor, discovers that the statements are not suitably titled, Wall should:

  1. Disclose any reservations in an explanatory paragraph and qualify the opinion.
  2. Apply to the state insurance commission for an advisory opinion.
  3. Issue a special statutory basis report that clearly disclaims any opinion.
  4. Explain in the notes to the financial statements the terminology used.

Question 189

Helpful Co., a nonprofit entity, prepared its financial statements on an accounting basis prescribed by a regulatory agency solely for filing with that agency. Green audited the financial statements in accordance with generally accepted auditing standards and concluded that the financial statements were fairly presented on the prescribed basis. Green should issue a:

  1. Qualified opinion.
  2. Standard three paragraph report with reference to footnote disclosure.
  3. Disclaimer of opinion.
  4. Special report.

Question 190

An auditor's report would be designated a special report when it is issued in connection with:

  1. Interim financial information of a publicly held company that is subject to a limited review.
  2. Compliance with aspects of regulatory requirements related to audited financial statements.
  3. Application of accounting principles to specified transactions.
  4. Limited use prospective financial statements such as a financial projection.