Question

Comparative financial statements include the financial statements of a prior period that were examined by a predecessor auditor whose report is not presented. If the predecessor auditor's report was qualified, the successor auditor must

a. Obtain written approval from the predecessor auditor to include the prior year's financial statements.
b. Issue a standard comparative audit report indicating the division of responsibility.
c. Express an opinion on the current year statements alone and make no reference to the prior year statements.
d. Disclose the reasons for any qualification in the predecessor auditor's opinion.

Answer 1

Comparative financial statements that include the financial statements of a prior period examined by a predecessor auditor require the successor auditor to disclose the reasons for any qualification in the predecessor auditor's opinion. The successor auditor should express an opinion on the current year statements alone and make no reference to the prior year statements.

Step-by-step explanation:

When preparing comparative financial statements that include the financial statements of a prior period examined by a predecessor auditor, the successor auditor has the responsibility to address any qualification in the predecessor auditor's opinion. The successor auditor must disclose the reasons for the qualification in the predecessor auditor's opinion. This ensures transparency and provides a better understanding of the financial statements.

The successor auditor is not required to obtain written approval from the predecessor auditor or issue a standard comparative audit report indicating the division of responsibility. Instead, the successor auditor should focus on expressing an opinion on the current year statements alone and make no reference to the prior year statements.