An Auditor Has Been Asked to Report on the Balance

question 53

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 because such engagements merely involve limited reporting objectives.
• B) may accept the engagement but should 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:

Depletion

The allocation of the cost of natural resources over the period they are consumed or sold.

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life, after deducting the cost of disposal.

Service Life

The expected duration or period an asset is considered useful and productive for its intended purpose.