Final answer:
The continuing auditor's report should cover both the current and prior year's audited financial statements, ensuring that they are presented fairly and consistently, especially when there are no changes in auditors. The auditor must also review the prior year's statements before issuing their report.
Step-by-step explanation:
When the audited financial statements of the prior year are presented together with those of the current year, the continuing auditor's report should cover both the current and the prior year's financial statements. It is important for the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
The auditor's report should indicate that the previous year's audit was performed by the same auditor, provided that there has been no change in auditors from the prior year to the current one. The auditor is required to perform an update review of the previous year's financial statements to determine if any adjustments or restatements are needed due to errors or omissions previously unrecognized or as required by new accounting policies or principles. If everything is consistent and no material misstatements are found, the auditor can then report on both years with the appropriate wording reflecting cumulative coverage of the financial statements.