not disclaim an opinion unless there is a scope limitation or independence problem. Choice "d"
is incorrect. The notes to the financial statements are communications from management, not
from the auditor.
QUESTION: 192
Helpful Co., a nonprofit entity, prepared its financial statements on an accounting basis
prescribed by a regulatory agency solely for filing with that agency. Green audited the financial
statements in accordance with generally accepted auditing standards and concluded that the
financial statements were fairly presented on the prescribed basis. Green should issue a:

A. Qualified opinion.
B. Standard three paragraph report with reference to footnote disclosure.
C. Disclaimer of opinion.
D. Special report.

Answer(s): D
Explanation:
Choice "d" is correct. A "special report" (unqualified) would be issued in an audit of financial
statements prepared on an accounting basis prescribed by a regulatory agency solely for filing
with that agency.
Special reports are also issued for:
1. Financial statements that are prepared in accordance with a comprehensive basis of
accounting other than GAAP.
2. Specified elements, accounts or items of a financial statement.
3. Compliance with contractual or regulatory requirements related to audited financial
statements.
4. Financial information presented in prescribed forms, or schedules that require a prescribed
form of auditor's report.
Choices "a" and "c" are incorrect. The special report would be unqualified since Green
concluded that the financial statements were fairly presented on the prescribed basis. Choice
"b" is incorrect. The wording of the special report varies slightly from the auditor's standard three
paragraph report, and includes an additional explanatory paragraph.
QUESTION: 193
An auditor's report would be designated a special report when it is issued in connection with:

A. Interim financial information of a publicly held company that is subject to a limited review.
B. Compliance with aspects of regulatory requirements related to audited financial statements.
C. Application of accounting principles to specified transactions.
D. Limited use prospective financial statements such as a financial projection.

Answer(s): B
Explanation:
Choice "b" is correct. An auditor's report would be designated a special report when it is issued
in connection with compliance with aspects of regulatory requirements related to audited
financial statements. Choice "a" is incorrect. A "review report" (not a "special report") should be
issued in connection with a limited review of interim financial information of a publicly held
company. Choice "c" is incorrect. Special reports are not issued in connection with the
application of accounting principles to specified transactions. Choice "d" is incorrect. An auditor

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