Choice "A" is correct. An auditor's report would be designated a report on compliance when it is issued in connection with compliance with aspects of regulatory requirements related to audited financial statements. It should be noted that a report on compliance in connection with audited financial statements provides only negative assurance on compliance. This type of report differs from a separate compliance audit and an attestation engagement.
Choice "d" is incorrect. A "review report" (not a "report on compliance") should be issued in connection with a limited review of interim financial information of a publicly held company.
Choice "b" is incorrect. A report on compliance pertaining to an audit of financial statements is not issued in connection with the application of accounting principles to specified transactions.
Choice "c" is incorrect. An auditor may compile, examine, or apply agreed-upon procedures to limited use prospective financial statements (PFS) such as a financial projection, but this would not constitute a report on compliance pertaining to audited financial statements.
