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

What should a successor auditor do when the predecessor auditor's report is qualified?

1. Express an opinion only on the current year's financial statements without reference to prior statements.

2. Explain to the client that comparative financial statements cannot be presented.

3. Indicate the substantive reasons for the prior qualification in the successor's opinion.

4. Issue an updated comparative audit report detailing the division of responsibility.

The correct answer is: Indicate the substantive reasons for the prior qualification in the successor's opinion.

When a predecessor auditor's report is qualified, it is essential for the successor auditor to indicate the substantive reasons for the prior qualification in their own opinion. This approach honors the work and findings of the predecessor while maintaining transparency with users of the financial statements regarding past issues. By highlighting the reasons for the qualification, the successor auditor provides context and clarity. This is particularly important for users who may rely on the financial statements to make informed decisions. It allows stakeholders to understand the historical context of the financial information they are reviewing and the nature of the qualifications raised previously. Additionally, indicating the reasons for the prior qualification helps to maintain the continuity of audit opinions and encourages accountability for the results of past audits. It ensures that the new opinion reflects not only the current financial state but also acknowledges any significant issues that have been reported in the past. Expressing an opinion only on the current year's financial statements ignores the historical context and may mislead users. Similarly, preventing the presentation of comparative financial statements would not meet the typical reporting standards, as comparative information provides valuable insights into trends and changes over time. Issuing an updated comparative audit report detailing the division of responsibility might complicate the understanding of the audit process without clearly informing stakeholders of the reasons for the previous qualification.