Multiple Choice Questions
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 statements 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 statements have been audited and found to be fairly presented.
(3) May assume that the first standard of reporting with respect to GAAP does not apply.
(4) Should comply with the request only if they constitute a major portion of the financial statements on which an auditor has disclaimed an opinion based on an audit.