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AICPA CPA-Auditing Exam
CPA Auditing and Attestation (AUD) (Page 39 )

Updated On: 12-Feb-2026
Page 39 of 207
PDF with 1026 Questions

Financial information is presented in a printed form that prescribes the wording of the independent auditor's report. The form is not acceptable to the auditor because the form calls for statements that are inconsistent with the auditor's responsibility. Under these circumstances, the auditor most likely would:

  1. Withdraw from the engagement.
  2. Reword the form or attach a separate report.
  3. Express a qualified opinion with an Explanation.
  4. Restrict use of the report to the party who designed the form.

Answer(s): B

Explanation:

Choice "b" is correct. An auditor should not sign a preprinted report form that includes statements that are inconsistent with the auditor's responsibility. Instead, the form should be revised or a separate, more accurate report should be attached.
Choice "a" is incorrect. Provided the form can be revised or a separate report can be attached, there is no need to withdraw from the engagement.
Choice "c" is incorrect. Qualified opinions relate to departures from GAAP and/or scope limitations, neither of which is the case here.
Choice "d" is incorrect. Even if the use of the report is restricted, an auditor should never sign a report including statements that are inconsistent with the auditor's responsibility.



Field is an employee of Gold Enterprises. Hardy, CPA, is asked to express an opinion on Field's profit participation in Gold's net income. Hardy may accept this engagement only if:

  1. Hardy also audits Gold's complete financial statements.
  2. Gold's financial statements are prepared in conformity with GAAP.
  3. Hardy's report is available for distribution to Gold's other employees.
  4. Field owns controlling interest in Gold.

Answer(s): A

Explanation:

Choice "a" is correct. The engagement described is one to express an opinion on a specified element, account, or item of the financial statements. Since Field's profit participation is based on Gold's net income or stockholders' equity, Hardy can accept the engagement only if Hardy also audited the complete financial statements.
Choice "b" is incorrect. If the auditor can express an opinion that the specified elements, accounts, or items are presented fairly on a basis of accounting other than GAAP, then the auditor can accept the engagement.
Choice "c" is incorrect. Hardy's report need not be available for distribution to Gold's other employees.
Usually the distribution of this type of report is restricted to those within the entity and the parties to the contract or agreement. This is necessary because the basis of presentation is determined by reference to a document that would not generally be available to other third parties. Mandatory distribution of an audit report is never required.
Choice "d" is incorrect. Field does not need to own a controlling interest in Gold.



Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor's report included a statement that the current asset portion of the entity's balance sheet was fairly stated. The inclusion of this statement is:

  1. Not appropriate because it may tend to overshadow the auditor's disclaimer of opinion.
  2. Not appropriate because the auditor is prohibited from reporting on only one basic financial statement.
  3. Appropriate provided the auditor's scope paragraph adequately describes the scope limitation.
  4. Appropriate provided the statement is in a separate paragraph preceding the disclaimer of opinion paragraph.

Answer(s): A

Explanation:

Choice "a" is correct. Piecemeal opinions (opinions on parts of the financial statements, when those parts constitute a major portion of the financial statements) are not appropriate if the auditor has disclaimed an opinion or issued an adverse opinion, because they may overshadow the auditor's opinion on the financial statements taken as a whole. An opinion on specified elements that does not constitute a piecemeal opinion may be expressed, but should not accompany the disclaimer of opinion or the adverse opinion.
Choice "b" is incorrect. The auditor may express an opinion on one financial statement, even if the auditor must issue a disclaimer on the financial statements taken as a whole. Choice "c" is incorrect. Even with adequate description in the scope paragraph, an opinion on the current asset portion of the balance sheet cannot be included in a disclaimer of opinion, as it might overshadow the disclaimer.
Choice "d" is incorrect. It is not appropriate to include an opinion on the current asset portion of the balance sheet in a disclaimer of opinion, as it might overshadow the disclaimer.



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.

Answer(s): D

Explanation:

Choice "d" is correct.
When reporting on financial statements prepared in conformity with a basis of accounting other than GAAP, the auditor should identify in a separate paragraph the basis as a comprehensive basis other than GAAP.
Choice "a" is incorrect. The statements would be examined in accordance with GAAS; however, no opinion (or disclaimer) is given regarding this fact.
Choice "b" is incorrect. The auditor should express an opinion on the financial statements' conformity with the comprehensive basis other than GAAP.
Choice "c" is incorrect. The auditor would include a statement indicating that the basis differs from GAAP, but need not quantify the differences among various bases of accounting.



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

Answer(s): A

Explanation:

Choice "a" is correct. An independent auditor may express an opinion on one or more specified elements, accounts, or items of a financial statement as a special engagement, not in conjunction with an audit.
Choices "b", "c", and "d" are incorrect, per above Explanation.






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