An Auditor Who Is Requested to Provide a Report on Application

question 108

Multiple Choice

An auditor who is requested to provide a report on application of requirements of an appropriate financial reporting framework may not

• A) Issue an opinion on the accounting treatment of a hypothetical transaction.
• B) Discuss the requirements with the client's current auditors.
• C) Limit the report to the sole use of specified parties.
• D) State that differences in facts, circumstances, or assumptions might change the conclusion.

---

Definitions:

Recognition

In accounting, recognition refers to the formal recording of an item in the financial statements, acknowledging its existence and the fact that it meets the criteria for financial reporting.

Revenue

Income that a business receives from its normal business activities, usually from the sale of goods and services to customers.

Deferral

A deferral occurs when cash related to a future revenue or expense has been initially recorded as a liability or an asset.

Unearned Revenue

Money received by a business for goods or services that have yet to be delivered or performed.