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Exam AUD topic 1 question 237 discussion

Actual exam question from AICPA's AUD
Question #: 237
Topic #: 1
[All AUD Questions]

Baker, CPA, was engaged to review the financial statements of Hall Company, a nonissuer. Evidence came to Baker's attention that indicated substantial doubt as to Hall's ability to continue as a going concern. The principal conditions and events that caused the substantial doubt have been fully disclosed in the notes to
Hall's financial statements. Which of the following statements best describes Baker's reporting responsibility concerning this matter?

  • A. Baker is not required to modify the accountant's review report.
  • B. Baker is not permitted to modify the accountant's review report.
  • C. Baker should issue an accountant's compilation report instead of a review report.
  • D. Baker should express a qualified opinion in the accountant's review report.
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Suggested Answer: A 🗳️
Choice "A" is correct. Since the principal conditions and events that caused the substantial doubt as to the company's ability to continue as a going concern have been fully disclosed in the notes to Hall's financial statements, Baker is not required to modify the accountant's review report. Baker may, however, choose to emphasize this issue in the report.
Choice "B" is incorrect. The auditor is permitted to modify his review report as he/she feels appropriate in the circumstances.
Choice "C" is incorrect. Baker did not perform a compilation; therefore, a compilation report would not be appropriate.
Choice "D" is incorrect. Since the facts have been fully disclosed in the notes to the financial statements, no modification to the review report is required. Also, an opinion is never expressed based on a review engagement.
by gemazyni at April 5, 2025, 4:22 p.m.

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