An auditor is performing a review of a nonissuer's financial statements. The auditor becomes aware of a material departure from GAAP. Management refuses to correct it. The auditor decides to modify the report. Which of the following is the correct conclusion to express?

Answer options:

'In our opinion, except for the issue described..., the financial statements present fairly...'

'Based on our review, except for the issue described..., we are not aware of any material modifications...'

'We do not express an opinion or conclusion.'

'The financial statements are not in accordance with GAAP.'

How to approach this question

Review = 'Not aware of material modifications'. Qualified Review = 'Except for X, not aware...'.

Full Answer

B.'Based on our review, except for the issue described..., we are not aware of any material modifications...'✓ Correct

'Based on our review, except for the issue described..., we are not aware of any material modifications...'

A review report provides limited assurance. The conclusion is phrased as 'We are not aware of any material modifications.' If there is a departure, it becomes 'Except for [the departure], we are not aware...'.

Common mistakes

Using audit opinion language ('Present fairly') for a review.

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