I got this practice test question wrong twice because I was considering the old format, that is “An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the FS.”
Why, oh why?
How does an auditor make the following representations when issuing the unmodified audit opinion on comparative financial statements?
Consistent application >>>>>>> Examination of evidence
of accounting principles >>>>>> on a test basis
a. Implicitly >>>>>>> Implicitly
b. Implicitly >>>>>>> Explicity
c. Explicitly >>>>>> Explicitly
d. Explicitly >>>>>> Implicitly
Explanation
Choice “a” is correct. Consistency is implicit in the auditor's report, and will be explicitly mentioned in an emphasis-of-a-matter paragraph only if there are issues with consistency. There is no explicit reference to “test basis.” The report says “An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.”
Choices “d”, “b”, and “c” are incorrect based on the above explanation.
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