An entity's comparative financial statements include the financial statements of the prior year that were audited by a predecessor auditor whose report is not presented.If the predecessor's report was qualified,the successor should
A)Issue an updated comparative report indicating the involvement of component auditors.
B)Explain to the client that comparative financial statements may not be presented under these circumstances.
C)Express an opinion only on the current year's financial statements and make no reference to the prior years' statements.
D)Indicate the substantive reasons for the qualification in the predecessor auditors' opinion.

Question

Quizplus · Accepted Answer

If the predecessor auditor's report is not presented and it contained a qualification, the successor auditor should indicate the substantive reasons for the qualification in the predecessor auditor's report in the current year's report. This is required by AU-C section 510, which states that "the successor auditor should make reference to the report of the predecessor auditor, and describe the nature of, and reasons for, the predecessor auditor's qualification..." This ensures that users of the financial statements are aware of the reasons for the qualification and can better understand the effects on the current year's financial statements. Therefore, option D is the best choice.

An Entity's Comparative Financial Statements Include the Financial Statements of the Prior