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 control ing interest in Gold.
QUESTION: 188
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:

A. Not appropriate because it may tend to overshadow the auditor's disclaimer of opinion.
B. Not appropriate because the auditor is prohibited from reporting on only one basic financial
statement.
C. Appropriate provided the auditor's scope paragraph adequately describes the scope
limitation.
D. 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.
QUESTION: 189
When an auditor reports on financial statements prepared on an entity's income tax basis, the
auditor's report should:

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

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