Response to the following questions:
1. List four bases for special purpose financial statements. Why is it important that the audit report clearly identify the basis of accounting used in the preparation of the financial statements?
2. In which of the following situations would an auditor ordinarily issue an unqualified/ unmodified financial statement audit opinion with no explanatory (or emphasis-ofmatter/other-matter) paragraph?
a. The auditor wishes to emphasize that the entity had significant related-party transactions.
b. The auditor decides to refer to the report of another auditor as a basis, in part, for the auditor's opinion.
c. The entity issues financial statements that present financial position and results of operations but omits the statement of cash flows.
d. The auditor has substantial doubt about the entity's ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements.