A1:3 - Reports of Audited Financial Statements

Question 1

What is an unmodified audit opinion?

Answer 1

The auditor should express an unmodified opinion when the auditor concludes that the financial statements are presented fairly, in all material aspects, in accordance with the applicable financial reporting framework.

Question 2

What is included in the title of an auditor’s report?

Answer 2

“Independent” should be included in the report title.

Question 3

Who is the addressee of an auditor’s report?

Answer 3

The report is addressed as required by the circumstances of the engagement.

Question 4

What is included in the introductory paragraph of an auditor’s report?

Answer 4

The introductory paragraph should:

1. Identify the entity who financial statements should be audited.
2. State that the financial statements have been audited.
3. Identify the title of each financial statement.
4. Specify the date(s) or period(s) covered by each financial statement.

Question 5

What is included in the Management’s Responsibility paragraph of an auditor’s report?

Answer 5

MR DIM

1. An explanation that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework; and
2. A statement that this responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud.

Question 6

What is included in the Auditor’s Responsibility paragraph of an auditor’s report?

Answer 6

REPPORTS CRAME

1. A statement that the responsibility of the auditor is to express an opinion on the financial statements based on the audit.
2. A statement that the audit was conducted in accordance with auditing standards generally accepted in the United States of America.
3. A statement that those standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free material misstatement.
4. A description of the audit that states that:
   a. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
   b. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error or fraud.
   c. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control and accordingly, no such opinion is expressed.
   d. An audit includes evaluating the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
5. A statement whether the auditor believes that the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.