associated with such information. Choice "c" is incorrect. The inclusion of segment information
is a GAAP requirement, and a separate opinion is not required.
QUESTION: 120
Green, CPA, is requested to render an opinion on the application of accounting principles by an
entity that is audited by another CPA. Green may:

A. Not accept such an engagement because to do so would be considered unethical.
B. Not accept such an engagement because Green would lack the necessary information on
which to base an opinion without conducting an audit.
C. Accept the engagement but should form an independent opinion without consulting with the
continuing CPA.
D. Accept the engagement but should consult with the continuing CPA to ascertain all the
available facts relevant to forming a professional judgment.

Answer(s): D
Explanation:
Choice "d" is correct. A "reporting accountant" (an accountant in public practice who is
requested to render an opinion on the application of GAAP by an entity audited by another CPA)
may accept the engagement, but should consult with the "continuing CPA" to ascertain the
available facts relevant to forming a professional judgment. Choices "a" and "b" are incorrect. A
reporting CPA may accept an engagement to render an opinion on GAAP of an entity audited
by another CPA. The reporting CPA should consult with the continuing CPA to obtain pertinent
information. Choice "c" is incorrect. The reporting accountant should consult with the continuing
accountant to ascertain all the available, relevant facts.
QUESTION: 121
In its annual report to shareholders, Lake Co. included a separate management report that
contained additional information. Lake's auditor is expressing an unqualified opinion on Lake's
financial statements but has not been engaged to examine and report on this additional
information. What is the auditor's responsibility concerning such a report?

A. The auditor should add an explanatory paragraph to the report on the financial statements
disclaiming an opinion on the additional information.
B. The auditor has no obligation to read the management report or to verify the accuracy or
appropriateness of its contents.
C. The auditor should request Lake to place the management report in its annual report where it
wil not be misinterpreted to be the auditor's assertion.
D. The auditor should read the management report and consider whether it contains a material
misstatement of fact.

Answer(s): D
Explanation:
Choice "d" is correct. The auditor should read other information accompanying the basic
financial statements and consider whether it contains a material inconsistency or material
misstatement of fact. Choice "a" is incorrect. The auditor generally does not add a disclaimer
paragraph in this situation. Choice "b" is incorrect. The auditor should read other information
accompanying the basic financial statements and consider whether it contains a material
inconsistency or material misstatement of fact. Choice "c" is incorrect. Even if the management

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