The following questions concern reports issued by auditors, other than those on historical financial statements. Choose the best response.
a. An auditor is reporting on cash basis financial statements. These statements are best
referred to in the opinion of the auditor by which of the following descriptions?
(1) Cash receipts and disbursements and the assets and liabilities arising from cash
transactions
(2) Financial position and results of operations arising from cash transactions
(3) Balance sheet and income statements resulting from cash transactions
(4) Cash balance sheet and the source and application of funds
b. When asked to perform an audit to express an opinion on one or more specified elements, accounts, or items of a financial statement, the auditor
(1) may not describe auditing procedures applied.
(2) should advise the client that the opinion can be issued only if the financial state-
ments have been audited and found to be fairly presented.
(3) may assume that the standards of reporting with respect to GAAP do not apply.
(4) should comply with the request only if they constitute a major portion of the finan-
cial statements on which an auditor has disclaimed an opinion based on an audit.
