25-20 (Objective 25-8) The following questions concern reports issued by auditors, other than those on historical financial statements. Choose the best response. a. An auditor is reporting on cash basis financial statements. These statements are best referred to in the opinion of the auditor by which of the following descriptions? (1) Cash receipts and disbursements and the assets and liabilities arising from cash transactions. (2) Financial position and results of operations arising from cash transactions. (3) Balance sheet and income statements resulting from cash transactions. (4) Cash balance sheet and the source and application of funds. b. Which of the following statements with respect to an auditor's report expressing an opinion on a specific item on a financial statement is correct? (1) Such a report can be expressed only if the auditor is also engaged to audit the entire set of financial statements. (2) Materiality must be related to the specific item rather than to the financial state- ments taken as a whole. (3) The attention devoted to the specified item is usually less than it would be if the financial statements taken as a whole were being audited. (4) The auditor who has issued an adverse opinion on the financial statements taken as a whole can never express an opinion on a specified item in these financial statements. c. When asked to perform an audit to express an opinion on one or more specified elements, accounts, or items of a financial statement, the auditor (1) may not describe auditing procedures applied. (2) should advise the client that the opinion can be issued only if the financial state- ments have been audited and found to be fairly presented engagements b. Describe what you should do in each of the preceding situations, assuming each one is material. 25-23 (Objective 25-1 ISSARS contain several procedures that are required when engaged to perform a compilation or review engagement. Below are ten statements that may or may not be relevant to a compilation or review engagement. For each of the ten statements, indicate whether the procedure is to be performed in a compilation or review engagement. Required for a Compilation Review Description of Procedure Engagement? Engagement? 1. Obtain a written engagement letter. 2. Understand the client's industry and the nature of the client's business. 3. Read the financial statements. 4. Design and perform analytical procedures. 5. Make inquiries of client management. 6. Perform tests of controls. 7. Assess fraud risk. 8. Obtain a letter of representation from management Type here to search O DALL