Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta's auditor, discovers that the statements are not suitably titled, Wall should:

Question

Quizplus · Accepted Answer

Choice "A" is correct. Financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP that are not suitably titled require a qualified opinion with an explanatory paragraph. Choice "B" is incorrect. The financial statements are not suitably titled. The auditor does not need any advice from the insurance commission as to how the statements should be titled or as to how to handle the situation. Choice "C" is incorrect. The auditor would not disclaim an opinion unless there is a scope limitation or independence problem. Choice "D" is incorrect. The notes to the financial statements are communications from management, not from the auditor.