16. Reports - Other Modifications

Question 1

When is an emphasis-of-matter paragraph used?

Answer 1

when (1) the matter is fundamental to users’ understanding of the statements (2) the auditor considers that drawing users’ attention to the matter is necessary and (3) the matter is appropriately presented and disclosed in the statements.

Question 2

How is the change characterized but an auditor if the issuer goes from an accounting principle not in accordance with the framework to an accounting principle in accordance with the framework?

Answer 2

As a correction of a misstatement.

Question 3

What is management responsible for in regards to the uncertainties that exist at the end of the period?

Answer 3

That management is responsible for (1) estimating the effect on the future events on the financial statements or (2) determining that a reasonable estimate is not possible and making required disclosures.

Question 4

If the auditor’s report does not state the effect of the change in accounting principle on the comparability of the FS what does that mean?

Answer 4

That the comparability has not been materially affected by such changes or corrections.

Question 5

When should the auditor’s report on comparative financial statements be dated?

Answer 5

No earlier than the date the auditor obtained sufficient appropriate evidence for the opinion on the most recent audit.

Question 6

When can an auditor express an unmodified opinion with regards to a change in accounting principle?

Answer 6

If (1) the new principle is in accordance with the framework (2) disclosures are adequate and (3) the entity has justified the change

Question 7

What does an emphasis-of-matter paragraph in the auditor’s report draw attention to?

Answer 7

To matters fundamental to users’ understanding of the financial statements.

Question 8

If an accounting change has no material effect on the current year FS, but is expected to have a material effect in later years, the change should be

Answer 8

Disclosed in the notes to the financial statements of the current year.

Question 9

If the auditor has substantial doubt about a firm’s ability to continue as a going concern, how should this be reported?

Answer 9

in a separate section with the heading Substantial Doubt About the Entity’s Ability to Continue as a Going Concern

Question 10

What should the group engagement team obtain from the component auditor’s?

Answer 10

An understanding of the component’s auditor’s professional competence and compliance with ethical requirements.