Choice "c" is correct. The auditor must communicate to the audit committee, in writing,
regarding the proposed tax services and related fees, and must discuss with the audit
committee the potential effects of the proposed tax services on the firm's independence. Tax
services related to contingent fee arrangements, confidential tax transactions, and certain
aggressive tax transactions are expressly prohibited. Choices "a", "b", and "d" are incorrect,
based on the above Explanation. Other Engagements, Reports, and Accounting Services
QUESTION: 186
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:

A. Withdraw from the engagement.
B. Reword the form or attach a separate report.
C. Express a qualified opinion with an Explanation.
D. 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.
QUESTION: 187
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:

A. Hardy also audits Gold's complete financial statements.
B. Gold's financial statements are prepared in conformity with GAAP.
C. Hardy's report is available for distribution to Gold's other employees.
D. 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.
Usual y the distribution of this type of report is restricted to those within the entity and the parties

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