Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

How do auditors express their representations on comparative financial statements?

1. Explicitly VS. Explicitly

2. Explicitly VS. Implicitly

3. Implicitly VS. Explicitly

4. Implicitly VS. Implicitly

The correct answer is: Explicitly VS. Implicitly

When auditors express their representations on comparative financial statements, they do so explicitly for the most recent period and implicitly for the prior period. In this context, "explicitly" means that the auditor provides a clear and direct statement regarding the accuracy and fairness of the current period's financial statements, often through the wording of their audit report. This includes a definitive assertion about the present year's financial reporting. For the prior period, however, the auditor typically does not provide a similar explicit statement as a direct audit of that time may not have been performed at the same level of detail or integration as the current audit. Instead, the auditor's representation regarding the prior period's data is generally implicit, as they rely on the assumption that the previous year’s financial statements were audited and that the current presentation is consistent with those earlier statements. This distinction is critical as it reflects the auditor's approach to assuring stakeholders about the financial reporting reliability over successive periods, emphasizing the current year's explicit assurance while referencing the prior period's statements in a less direct manner.