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In: Accounting

On March 12, 2016, Kristen & Valentine, CPAs, completed the audit of the financial statements of...

On March 12, 2016, Kristen & Valentine, CPAs, completed the audit of the financial statements of Modern Museum, Inc., for the year ended December 31, 2015. 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 2014 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)

Solutions

Expert Solution

Reporting on Comparative Financial Statements

See section 9200 for interpretations of this section.

Source: SSARS No. 2; SSARS No. 3;

SSARS No. 4; SSARS No. 5;

SSARS No. 7; SSARS No. 11; SSARS No. 12;

SSARS No. 15; SSARS No. 17

.01 This section establishes standards for reporting on comparative financial statements[1] of a nonissuer when financial statements of one or more periods presented have been compiled and reported on or reviewed in accordance with section 80, Compilation of Financial Statements, or section 90, Review of Financial Statements, respectively. 2 [Revised, October 2000, to reflect conforming changes necessary due to the issuance of Statement on Standards for Accounting and Review Services (SSARS) No. 8. As amended, effective for compilations and reviews of financial statements for periods ending after December 15, 2008, by SSARS No. 17. Revised, December 2010, to reflect conforming changes necessary due to the issuance of SSARS No. 19.]

.02 When comparative financial statements are presented, the accountant should issue an appropriate report(s) covering each period presented in accordance with the provisions of this section. Exhibit A, "Illustrative Compilation Reports on Comparative Financial Statements," and exhibit B, "Illustrative Review Reports on Comparative Financial Statements," provide illustrative reports on comparative financial statements, including how the title of the report may be modified when the level of service between the years is different.[3] .

03 Client-prepared financial statements of some periods that have not been audited, reviewed, or compiled may be presented on separate pages of a document that also contains financial statements of other periods on which the accountant has reported if they are accompanied by an indication by the client that the accountant has not audited, reviewed, or compiled those financial statements and that the accountant assumes no responsibility for them.

Accountant’s Compilation Report1

[Appropriate Salutation]

I (we) have compiled the accompanying balance sheet of Kristen & Valentine,

  Company as of March 31, 2016, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the 2015 financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America


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