When a CPA reports on audited financial statements prepared on the cash receipts and disbursements basis of accounting, the report should:

Question

Quizplus · Accepted Answer

Choice "C" is correct. A report on other comprehensive basis of accounting ("OCBOA") financial statements should include an explanatory paragraph stating the basis, referring to the footnote that describes it, and indicating that it is a non-GAAP basis. Choice "A" is incorrect. A report on other comprehensive basis of accounting ("OCBOA") financial statements does not include an evaluation of the usefulness of the basis of accounting. Choice "B" is incorrect. A report on other comprehensive basis of accounting ("OCBOA") financial statements makes reference to the note in the financial statements that describes the accounting basis, not to a note describing management's responsibility. Choice "D" is incorrect. The separate explanatory paragraph states the basis, refers to the footnote describing it, and indicates that it is a non-GAAP basis. It does not discuss the justification for the non-GAAP basis, nor does the CPA indicate concurrence.

When a CPA Reports on Audited Financial Statements Prepared on the Cash