Auditing and Assurance Services 9th Edition by Alvin Arens,Mark Beasley,Randy Elder

Exercise 16

On March 12, 2014, Kristen Valentine, CPAs, completed the audit of the financial statements of Modern Museum, Inc., for the year ended December 31, 2013. Modern is a privately held company. Modern Museum presents comparative financial statements on a modified cash basis. Assets, liabilities, fund balances, support, revenues, and expenses are recognized when cash is received or disbursed, except that Modern includes a provision for depreciation of buildings and equipment. Kristen Valentine believes that Modern's three financial statements, prepared in accordance with a basis of accounting other than generally accepted accounting principles, are adequate for Modern's needs and wishes to issue a special report on the financial statements. Kristen Valentine has gathered sufficient competent evidence to be satisfied that the financial statements are fairly presented according to the modified cash basis. Kristen Valentine audited Modern's 2012 financial statements and issued an auditor's special report expressing an unmodified opinion.
Required:
Draft the audit report to accompany Modern's comparative financial statements.
(AICPA, adapted)