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

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If an auditor lacks sufficient evidence about the application of accounting principles from prior years, what action should they take?

  1. Express a qualified opinion due to scope limitation

  2. Refuse to be associated with the financial statements

  3. Clearly state the financial statements are not comparable

  4. Be unable to express an opinion on current operations

The correct answer is: Be unable to express an opinion on current operations

When an auditor lacks sufficient evidence regarding the application of accounting principles from prior years, they face a significant challenge in forming an opinion on the financial statements. Current operations often rely on the understanding of the prior years' principles and the consistency of application across periods. Without adequate evidence about those prior applications, the auditor cannot assess whether the financial statements present a true and fair view of the current operations. This lack of information creates a situation where the auditor does not have an appropriate basis to form an opinion about the financial statements as a whole. Therefore, stating that they are unable to express an opinion on current operations is the appropriate course of action. This reflects the inherent uncertainty about how past practices might influence the current financial reporting. In contrast, the other options suggest actions that might not accurately reflect the situation the auditor is in. A qualified opinion due to scope limitation implies that there are specific issues that allow for limited reporting, which may not capture the comprehensive uncertainty regarding past accounting principles. Refusing to be associated with the financial statements suggests a stronger level of concern, perhaps indicating a fundamental issue with the integrity of the financial statements themselves rather than merely a lack of evidence. Clearly stating that the financial statements are not comparable might be valid but does not address the inability to

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