Question & Answer: When an auditor reports on financial statements prepared on an entity’s income tax basis, the auditor’s report should…..

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

		A. Disclose that the statements are not intended to conform with generally accepted accounting principles
		B. Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards
		C. Not express an opinion on whether the statements are presented in conformity with the comprehensive basis of accounting used
		D. Include an explanation of how the results of operations differ from the cash receipts and disbursements basis of accounting

An auditor performing an audit of internal control over financial reporting would be required to:

A. Rely on the work of internal auditors

B. Test all of the entity’s internal controls

C. Form an opinion on the effectiveness of internal control

D. Randomly identify accounts for an audit of internal control

Which of the following is not true?

A. The auditor should not communicate with management at all until the audit of internal control over financial reporting is finished

B. Written communication between the auditor and management about internal control over financial reporting should include the definitions of control deficiencies, significant deficiencies, and material weaknesses

C. The auditor should not include in the audit report that no significant deficiencies were noted during an audit of internal control over financial reporting

D. If fraud is discovered, the auditor must report it to the appropriate level of management

In the first audit of a client, because of the client’s record retention policies, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. If the amounts in question could materially affect current operating results, the auditor would

		A. Be unable to express an opinion on the current year’s results of operations and cash flows
		B. Express a qualified opinion on the financial statements because of a client-imposed scope limitation
		C. Withdraw from the engagement and refuse to be associated with the financial statements
		D. Specifically state that the financial statements are not comparable to the prior year because of an uncertainty

Expert Answer

1
Disclose that the statements are not intended to conform with generally accepted accounting principles
2
An auditor performing an audit of internal control over financial reporting would be required to Form an opinion on the effectiveness of internal control
3
The auditor SHOULD NOT COMMUNICATE WITH MANAGEMENT until the audit of internal control over financial reporting is finished.
4
Be unable to express an opinion on the current year’s results of operations and cash flows

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