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.
QUESTION: 190
A CPA is permitted to accept a separate engagement (not in conjunction with an audit of
financial statements) to audit an entity's:
A. Option A
B. Option B
C. Option C
D. 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.
QUESTION: 191
Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance
companies use pursuant to the rules of a state insurance commission. If Wal , CPA, Delta's
auditor, discovers that the statements are not suitably titled, Wal should:

A. Disclose any reservations in an explanatory paragraph and qualify the opinion.
B. Apply to the state insurance commission for an advisory opinion.
C. Issue a special statutory basis report that clearly disclaims any opinion.
D. Explain in the notes to the financial statements the terminology used.

Answer(s): A
Explanation:
Choice "a" is correct. Financial statements prepared in accordance with a comprehensive basis
of accounting other than GAAP that are not suitably titled require a qualified opinion with an
explanatory paragraph. Choice "b" is incorrect. The financial statements are not suitably titleD.
The auditor does not need any advice from the insurance commission as to how the statements
should be titled or as to how to handle the situation. Choice "c" is incorrect. The auditor would

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