An Auditor Has Been Asked to Report on the Balance

question 7

Multiple Choice

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements.The auditor will have access to all information underlying the basic financial statements.Under these circumstances,the auditor:

• A)May accept the engagement.
• B)May accept the engagement but must disclaim an opinion because of an inability to apply the procedures considered necessary.
• C)Should refuse the engagement because there is a client-imposed scope limitation.
• D)Should refuse the engagement because of a departure from generally accepted auditing standards.

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Definitions:

Novation

The act of replacing an existing obligation with a new one, thereby extinguishing the original obligation.

Substituted Contract

This is a legal agreement replacing an earlier contract, agreed upon by all parties involved, and discharging the original contractual obligations.

Obligee

The party in a contract or agreement who is entitled to receive a performance or benefit from the obligor.

Obligor

An individual or entity legally obliged to provide a payment or service to another party under the terms of a contract.