[maria10]

Hey Guys, I wanted to see if someone could help me with this question:

Question CPA-03612

In performing a financial statement audit in accordance with Government Auditing Standards, an auditor is required to report on the entity’s compliance with laws and regulations. This report should:

a.State that the audit should be planned to obtain reasonable assurance about whether noncompliance could have a material effect on the entity’s programs

b.Describe the laws and regulations that the entity must comply with.

c.Provide an opinion on overall compliance with laws and regulations.

d.Provide negative assurance of the entity’s legal compliance.

Explanation

Choice “a” is correct. Basic elements of a report on compliance include a statement that the audit should be planned to obtain reasonable assurance about whether noncompliance could have a material effect on the programs audited.

Choice “b” is incorrect. It is not necessary to describe the laws and regulations with which the entity must comply.

Choice “c” is incorrect. The objective of the audit of the financial statements is not to provide an opinion on overall compliance with laws and regulations.

Choice “d” is incorrect. The report should specifically state that a compliance audit does not provide a legal determination of the entity’s compliance.

Why isn’t C the correct answer? Don’t GAGAS reports provide an opinion on the overall compliance with laws and regulations? I don’t get it…

Thanks!

[Excited_CPA]

Hi maria10,

I think it has to do with the fact that determining a company's compliance with laws and compliance is a legal determination, and auditor's are not lawyers.

BEC 04/14/12 87
FAR 08/28/12 88
AUD 10/06/12 94
REG 02/09/13 91

[Anonymous]

Opinion para – GAS provide reasonale assurance on compliance and reulation.

Option c – the wording of this option is bit tricky , GAS doesnt provide an overall opinion , (may be I am wrong) ..

[maria10]

I think that's why D is not the answer – because the auditor cannot provide a legal determination of their compliance – but they do provide an opinion on ‘yes they are complying with the laws'; they just can't state the legal implications of that because they are not lawyers.

I'm still confused, even as I go back and read my book and reread the report, they do provide an opinion on meeting the compliance requirements.

[maria10]

@Nam – that might be it, but that's just really tricky if that's the case.

[Anonymous]

D is not the answer since you are only responsible for providing assurance on compliance with laws and regs “that have a direct and material effect on FS”

[Author]

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