[Anonymous]

The objective of a review of interim financial information of an issuer is to provide an accountant with a basis for reporting whether:

A. material modifications should be made to conform with the applicable financial reporting framework.

B. a reasonable basis exists for expressing an updated opinion regarding the financial statements that were previously audited.

C. condensed financial statements or pro forma financial information should be included in a registration statement.

D. the financial statements are presented fairly in accordance with the applicable financial reporting framework.

A.The objective of a review of interim financial information of an issuer is to provide the CPA with a basis for reporting whether material modifications should be made to the interim information to comply with the applicable financial reporting framework.

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Why is it A and not D? Wouldn’t that also be an equally correct answer?

[Anonymous]

Seems like one of those “got ya” questions… If this shows up on an exam hopefully it's because you are doing well. However, since you've reviewed it, I bet you'll remember it on exam day ;).

[Anonymous]

No, because choice “D” implies positive assurance as it would serve as the basis for providing an audit opinion, whereas choice “A” implies negative assurance because in a review opinion the auditor would state whether there were any material modifications that should be made that came to the auditor's attention.

[Anonymous]

@Below – thank you, that makes complete sense.

[Anonymous]

Because D implies that “positive assurance” is being provided. A FS review provides only “limited assurrance” or “negative assurance”, hence the flaky statement “No material modifications should be made”.

The purpose of a review is not to ensure that the FS's are in conformity with GAAP. They merely indicate there there are no obvious mistakes in the presentation of the FS's. Remember that a review includes only analytical procedures and inquiry.

It is important that you remember the statement “material modification” as it is REALLY important.

[Author]

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