Audit and Assurance Practice Exam

In which circumstance would an auditor modify the audit report on ICFR?

1. When financial statements are prepared incorrectly.

2. When management's report on ICFR is incomplete.

3. When there are no significant deficiencies noted.

4. When audit procedures are omitted.

The correct answer is: When management's report on ICFR is incomplete.

An auditor would modify the audit report on Internal Control over Financial Reporting (ICFR) when management's report on ICFR is incomplete. This situation highlights the importance of transparency and the necessity for the management to provide a full and accurate representation of the effectiveness of the internal controls in place. The auditor's role is to assess whether the controls are operating effectively and whether the management's assertions about these controls are substantiated. If the auditor finds that the management's report is not complete or does not adequately describe the internal control framework or the results of monitoring the controls, it indicates a potential failure to provide a true and fair representation of the company's internal controls. In such cases, the auditor must modify the report to reflect this inadequacy, as it affects the overall reliability of the financial reporting and compliance with regulatory standards. While it is generally important for financial statements to be prepared correctly, deficiencies in those statements do not directly pertain to the auditor's assessment of ICFR unless they also reflect issues in the adequacy of the controls. Similarly, having no significant deficiencies would not necessitate a modification, as the report would typically reflect the effectiveness in that circumstance. Finally, omitting audit procedures might highlight a lack of due diligence but does not directly correlate to