A1 - Audit Reports Flashcards
When there is a division of responsibility, (AKA an auditor does NOT accept responsibility for the work of another auditor), what sections of the auditor’s report are changed?
Only the Opinion section of the report. All other sections of the report remain unchanged.
When an auditor makes reference to a component auditor in the auditor’s report, how does it affect the auditor’s opinion?
It does not affect the auditor’s opinion at all (not even to include an emphasis of matter or other matter paragraph).
If a probable but inestimable uncertainly that is expected to result in a loss exists and is adequately disclosed, is the auditor required to add an emphasis of matter paragraph?
No. The auditor could always choose to if deemed significant enough, but in the absence of such a judgement, no paragraph is required, and the opinion can remain unmodified.
If a predecessor auditor reported an unmodified opinion on a prior year’s financials that is displayed in the current year’s auditor’s report, but the predecessor auditor’s report is NOT presented how does it affect the successor auditor’s opinion?
The successor auditor would include an other matter paragraph describing the predecessor auditor’s report.
If there is an audit issue, what are the two opinion options for an auditor?
Qualified or disclaimer of opinion.
If there is no audit issue, but there is an accounting/GAAP issue, what are the two opinion options for the auditor?
Qualified or adverse.
If there is no audit issue, and no accounting/GAAP issue, what is the last thing an auditor needs to determine in order to draft a report?
If there is no audit issue and no GAAP issue, then the auditor must decide whether any additional paragraphs need to be added to the report.
When an auditor decides to include their report on supplementary information in the auditor’s report, are they required to include any additional information in the auditor’s report?
Yes, the information will be included in a separate section of the auditor’s report.
Does a material and justified change in accounting principle require an additional paragraph in the auditor’s report?
Yes. A material and justified change in accounting principle requires an emphasis of matter paragraph that references the change in accounting principle.
When an auditor restricts the use of the auditor’s report, where would it be included?
A restriction of use would be included in an “other matter” paragraph.
Where should reference to a subsidiary & the magnitude of its financial statements that was NOT audited by the group auditor be included in the auditor’s report? (Assume responsibility for work was NOT assumed by group auditor)
In the opinion section of the report.
What does the responsibilities of management section of the auditor’s report say about the financial statements?
It uses the language “financial statements that are free from material misstatement whether due to fraud or error.”
Does the auditor’s responsibility paragraph include language “significant accounting estimates made by management”?
Yes.
When does an auditor have an active responsibility to investigate subsequent events?
An auditor has an active responsibility to investigate subsequent events up until the date of the auditor’s report. After then, the auditor no longer has an active responsibility to investigate, but should address anything that comes to their attention.
Note: an auditor DOES however have a responsibility to investigate omitted audit procedures discovered after the date of the auditor’s report.
What should an auditor do if a situation poses serious concerns about both the financial statements and management’s integrity?
In this situation, the auditor should withdraw from the engagement and not associate with the financial statements.
How should the auditor respond to omitted audit procedures discovered after the submission of the auditor’s report?
The auditor should investigate omitted audit procedures discovered after the submission of the audit report.
Note: The auditor does NOT however have a responsibility for investigating subsequent events after submission of the auditor’s report. But he/she should address subsequent events if they come to their attention.
