Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

What action should the successor auditor take if a predecessor's report included significant modifications?

1. Include a detailed explanation in the audit report

2. Express an opinion only on the current year's statements

3. Request a reissue of the predecessor’s report

4. Indicate the modifications without detailed explanation

The correct answer is: Express an opinion only on the current year's statements

The appropriate action for a successor auditor when a predecessor's report contains significant modifications is to express an opinion only on the current year's financial statements. This approach emphasizes that the successor auditor is solely responsible for the audit of the current period and that any modifications made in the predecessor's report do not reflect their findings or views on the earlier financial statements. When a predecessor auditor has made significant modifications, it indicates possible issues with the prior financial statements. The successor auditor typically will not have direct access to the predecessor's audit work papers or may not have independently evaluated the adequacy of the predecessor's disclosures. Therefore, expressing an opinion only on the current year's statements effectively delineates the responsibility for those financial statements between the two auditors and ensures clarity regarding the scope of the successor's audit. This approach maintains the integrity of the audit process and ensures that stakeholders understand that the successor auditor's opinion is based solely on their examination of the current year's financial statements, independent of the predecessor's findings, which could have been influenced by different factors or auditing standards. As a result, it helps avoid misunderstandings or misinterpretations of the financial reporting situation.