Charlie Company's comparative financial statements include the financial statements of the prior year that were audited by predecessor auditors whose report on those financial statements is not presented. If the predecessor's report was qualified, the successor auditors should
A)indicate in their report the substantive reasons for the qualification issued by the predecessor auditors.
B)request the entity to reissue the predecessor's report on the prior years' statements.
C)issue an updated comparative report on the entity's financial statements, indicating the involvement of component auditors.
D)express an opinion only on the current year's financial statements and make no reference to the prior years' financial statements or opinion.

Question

Quizplus · Accepted Answer

If the predecessor's report was qualified, the successor auditors should indicate in their report the substantive reasons for the qualification issued by the predecessor auditors. This is required by auditing standards to ensure that users of the financial statements are properly informed of any material issues with the prior year's financial statements. The successor auditors cannot reissue the predecessor's report and should not issue an updated comparative report unless they audit the prior year's financial statements themselves. They should also express an opinion on the current year's financial statements and refer to the prior year's financial statements and opinion.

Charlie Company's Comparative Financial Statements Include the Financial Statements of the Prior