An auditor is reporting on a nonissuer's compliance with a regulatory requirement in connection with a financial statement audit. The auditor has expressed an adverse opinion on the financial statements. Can the auditor issue a report on compliance providing 'negative assurance'?

Answer options:

Yes, provided the compliance report is in a separate document.

Yes, provided the instances of noncompliance are clearly identified.

No, negative assurance on compliance is prohibited when an adverse opinion is issued on the financial statements.

No, unless the compliance report is restricted use.

How to approach this question

Negative assurance requires a base level of confidence. If the financials are 'Adverse' (garbage), you can't give assurance on compliance.

Full Answer

C.No, negative assurance on compliance is prohibited when an adverse opinion is issued on the financial statements.✓ Correct

AU-C 806 prohibits providing negative assurance on compliance when the auditor has expressed an adverse opinion or disclaimer of opinion on the financial statements.

Common mistakes

Thinking separate reports solve the contradiction.

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