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

For an auditor reporting on a non-GAAP basis, what should their opinion include?

1. A statement on the unfair presentation of financial statements

2. A description of the suitable nature of the accounting basis

3. An opinion regarding compliance with all applicable principles

4. A statement of whether the statements conform to the identified basis

The correct answer is: A statement of whether the statements conform to the identified basis

When an auditor reports on financial statements prepared using a non-GAAP basis, it is crucial for their opinion to specifically address how those statements conform to the identified basis of accounting. This is because non-GAAP measures, while valuable in certain contexts, do not have the same universal acceptance or framework as GAAP (Generally Accepted Accounting Principles). Therefore, the auditor must indicate whether the financial statements are presented in accordance with the specific non-GAAP basis that has been adopted by the entity. This assessment helps users of the financial statements understand the basis used and provides context regarding the nature of the financial presentation. It guides users in evaluating the presentation and comparability of the financial data reported. By confirming adherence to the identified basis, the auditor adds a layer of credibility and transparency to the non-GAAP financial statements. The other options do not align with the specific focus that is required in auditor opinions regarding non-GAAP financial statements. While mentioning unfair presentation or compliance with principles could be pertinent in other contexts, the essential task here revolves around the conformity of the statements to the disclosed non-GAAP basis, making the correct choice vital for clarity in auditor reporting.