Area IV: Reporting — CPA Practice Question 29

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Rule: You cannot give 'negative assurance' (saying nothing is wrong) on compliance if you just said the whole financial statement is wrong (Adverse/Disclaimer).

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

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

Negative assurance on compliance ('nothing came to our attention') is only permitted when the auditor has expressed an unmodified or qualified opinion on the financial statements. If an adverse or disclaimer of opinion is issued, negative assurance on compliance is prohibited because the financial statements themselves are not reliable.

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Thinking 'Restricted Use' fixes this issue.

An auditor is issuing a report on compliance with contractual agreements in connection with the audit of financial statements. The auditor expressed an adverse opinion on the financial statements. Can the auditor issue a report on compliance providing negative assurance?

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Practice the full CPA AUD Practice Exam 5

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