Question

On March 12, 2019, Kristen & Valentine, CPAs, completed the audit of the financial statements of
Modern Museum, Inc., for the year ended December 31, 2018. 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 2017 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.

Answer 1

Independent Auditor's Report

We have audited the accompanying statements of assets and liabilities arising from cash transactions of Modern Museum, Inc. as of December 31, 2018, and related statements of revenue collected and expenses paid for the years then ended. These Financial Statements are responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As described these financial statements were prepared on the basis of cash receipts and disbursement, which is comprehensive basis of accounting other than generally accepted accounting principles.

In our opinion the financial statements referred to above present fairly, in all material respects, the assets and liabilities arising from cash transactions of Modern Museum, Inc as of December 31, 2018, and its revenue collected and expenses paid during the year then ended, on the basis of accounting described in note.

Kristen & Valentine, CPAs

March 12, 2019

Note : This report is intended solely for the information and use of board of directors and management of Modern Museum, Inc and for filing with the regulatory authority and should not be used for any other purpose.