An auditor is preparing a report on compliance with aspects of a contractual agreement (e.g., debt covenants) in connection with the audit of financial statements. Which of the following is a requirement for this report?

Answer options:

The report must be distributed to the general public.

The auditor must have audited the financial statements and expressed an unmodified or qualified opinion.

The auditor provides positive assurance on compliance.

The report can be issued even if the auditor disclaimed an opinion on the financial statements.

How to approach this question

Compliance Report (in connection with audit) = Negative Assurance. Prerequisite: Good Audit Opinion (Unmodified/Qualified). Restricted Use.

Full Answer

B.The auditor must have audited the financial statements and expressed an unmodified or qualified opinion.✓ Correct

AU-C 806 states that negative assurance on compliance is provided. This is only permitted if the auditor has audited the financial statements and issued an unmodified or qualified opinion. If an adverse or disclaimer was issued, compliance assurance is prohibited.

Common mistakes

Thinking positive assurance is given; forgetting the link to the audit opinion.

Question 50 All questions Question 52

Practice the full CPA AUD Practice Exam 3

78 questions · hints · full answers · grading

More questions from this exam

Q01A CPA firm is performing an audit of a nonissuer in accordance with GAO Government Auditing Stand...Hard Q02During the audit of an issuer, the engagement partner learns that the firm's tax partner, who pro...Hard Q03An auditor is planning an audit of a nonissuer's financial statements. The auditor decides to use...Medium Q04An auditor is assessing control risk for a nonissuer's revenue cycle. The auditor identifies that...Hard Q05During the audit of a manufacturing company's inventory, the auditor utilizes a variables samplin...Hard

View all 78 questions →