Abbot, CPA, as Principal Auditor for Consolidated Financial Statements, Is

question 55

Multiple Choice

Abbot, CPA, as principal auditor for consolidated financial statements, is using a qualified report of another auditor. Abbot does not consider the qualification material relative to the consolidated financial statements and Abbot is willing to accept responsibility for the work of the other auditor. What recognition, if any, must Abbot make in his report to the report of the other audit?

• A)He need make no reference.
• B)He must refer to the qualification of the other auditor and qualify his report likewise.
• C)He must include the other auditor's report with his report but need not qualify his report.
• D)He must include the other auditor's report with his report and give an explanation of its significance.

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Definitions:

Variable Costing

A cost system that excludes fixed costs from product costs and writes off all fixed costs against income in the year that the costs are incurred. Also called direct costing.

Step-fixed Costs

Expenses that remain constant for a set level of production or output, but can change when a certain threshold is crossed.

Inflationary Price Increase

The rise in prices of goods and services over time, typically due to an increase in the money supply or demand outpacing supply.

Reconciled

The process of making sure that two sets of records (usually the balances of two accounts) are in agreement.