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Topic
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The Becker explanation literally just rephrases the correct answers without explaining.
I selected a. I don’t understand why II is correct instead of I. So when you report on FS prepped in frameworks other than US GAAP, the US-style report has to be modified? What does modified mean here? Modified opinion or what? Is it just talking about modified format and content of the report?
Question:
The financial statements of KCP America, a U.S. entity, are prepared for inclusion in the consolidated financial statements of its non-U.S. parent. These financial statements are prepared in conformity with a financial reporting framework generally accepted in the parent’s country and are for use only in that country. How may KCP America’s auditor report on these financial statements?I.A U.S.-style report (unmodified).
II.A U.S.-style report modified to report on the financial reporting framework of the parent’s country.
III.The report form of the parent’s country.
I II III
a.Yes No Yes
b.No Yes No
c.No Yes Yes
d.Yes No NoBecker Explanation
Choice “c” is correct. No – Yes – Yes. When financial statements are prepared in accordance with a financial reporting framework generally accepted in the parent’s country and are for use only in that country, the auditor may report using either a U.S.-style report modified to report on the financial reporting framework of the parent’s country or the report form of the parent’s country.
Choices “d”, “b”, and “a” are incorrect, per the above explanation.
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