Auditing and Attestation - Certified Public Accountant (CPA) Practice Exam 2025 - Free CPA Practice Questions and Study Guide

When a predecessor auditor's report is qualified, it indicates that there are specific issues that affect the reliability of the financial statements. In this case, the successor auditor has a responsibility to ensure transparency and properly inform users of the financial statements about the reasons behind the qualification.

Indicating the substantive reasons for the qualification allows financial statement users to understand the nature of the concerns that led the predecessor auditor to issue a qualified opinion. This is vital for maintaining the integrity of the reporting process and ensuring that users are fully aware of potential risks or misstatements that could impact their decision-making.

In this scenario, failing to mention the reasons for the predecessor's qualification could mislead users about the reliability of the financial statements. Simply making no reference or issuing an updated report without acknowledgment would not provide users with a complete understanding of the situation. Similarly, reissuing the predecessor's report might not clarify the issues at hand and could create confusion instead. Thus, the approach of detailing the substantive reasons for the qualification is essential for effective communication and upholding auditing standards.