ExpertMedium1 markMultiple Choice
CPA · Question 67 · Area 4: Reporting
An auditor is auditing a client that uses a 'Special Purpose Framework' (e.g., Cash Basis). Which of the following is true regarding the auditor's report?
An auditor is auditing a client that uses a 'Special Purpose Framework' (e.g., Cash Basis). Which of the following is true regarding the auditor's report?
Answer options:
A.
The auditor must issue an adverse opinion because it is not GAAP.
B.
The report must include an Emphasis-of-Matter paragraph alerting readers to the special purpose framework.
C.
The opinion paragraph should state the statements are 'in accordance with GAAP'.
D.
No opinion is expressed on special purpose frameworks.
How to approach this question
Special Framework = Unmodified Opinion (on that framework) + EOM (warning it's not GAAP).
Full Answer
B.The report must include an Emphasis-of-Matter paragraph alerting readers to the special purpose framework.✓ Correct
The auditor's report on special purpose financial statements must include an emphasis-of-matter paragraph that indicates that the financial statements are prepared in accordance with the applicable special purpose framework and that the basis of accounting is a basis other than GAAP.
Common mistakes
Thinking Cash Basis implies an Adverse opinion.
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