A1: Audit Reports Flashcards
What standards provide the most authoritative US auditing guidance for nonissuers?
SASs, issued by AICPA Auditing Standard Board
What standards provide the most authoritative US auditing guidance for issuers?
ASs, issued by PCAOB
State the primary purpose of an audit.
To provided financial statement users with an opinion on whether the financial statements are fairly presented, in all material respects, in accordance with the applicable financial reporting framework.
What are the five general GAAS requirements related to the conduct of an audit?
SEJEC
- Professional Skepticism
- Ethical Requirements
- Professional Judgement
- Sufficient and Appropriate Audit Evidence
- Compliance with GAAS
Identify three inherent limitations of an audit.
- The nature of financial reporting.
- The nature of audit procedures.
- Timeliness of financial reporting and the balance between benefit and cost.
When should an auditor’s opinion be modified?
FS as a whole are materially misstated (GAAP Issue) or
unable to obtain sufficient appropriate evidence to conclude.
List in order the primary sections of an unmodified audit opinion (nonissuer).
Title Addresses Intro: Mgmt's responsibility Auditor's responsibility Opinion Report on other.
What should be included in the introductory paragraph of the unmodified audit opinion (nonissuer)?
Entity whose FS have been audited.
A statement that the FS were audited.
title of each FS audited
Dates or periods covered by each FS.
What should be included in the mgmt’s responsibility paragraph of the unmodified audit opinion (nonissuer)?
An explanation that management is responsible for the preparation and fair presentation of the FS in accordance with the applicable financial reporting framework.
A statement that this responsibility includes DIM of internal control relevant to the preparation and fair presentation of FS that are free from material misstatement, whether due to fraud or error.
What should be included in the auditor’s responsibility paragraph of the unmodified audit opinion (nonissuers)?
Four statements and one desc.
Auditor’s responsibility to express opinion.
Audit was conducted in accordance with standards
Auditor obtained reasonable assurance
Evidence obtained is sufficient and appropriate.
Description of the audit.
What should be included in the opinion paragraph of the unmodified audit opinion (nonissuer)?
FS are presented fairly, and
identification of the the framework
Where in the standard unmodified opinion (nonissuer) does the auditor refer to the applicable financial reporting framework?
Management’s responsibility paragraph and
Opinion paragraph.
Where in the standard unmodified opinion (nonissuer) does the the auditor refer to GAAS
Auditor’s responsibility paragraph.
List in order the primary sections of an unqualified audit opinion (issuer).
Title Addressee Opinion section Basis for Opinion section Signature, tenure, location Report date
What should be included in the opinion section of the unqualified audit opinion (issuer)?
Name of company being audited
identifying FS and scheduled been audited
FS and scheduled that were audited
Dates or periods covered
Opinion presented fairly with the framework.
What should be included in the first paragraph under the basis for opinion in the unqualified audit opinion (issuer)?
3 Statements
FS responsbility of management
Auditor Opinion
Auditor works for a PCAOB
Where in the standard unqualified opinion (issuer) does the auditor refer to the applicable financial reporting framework?
Opinion paragraph
Where in the standard unqualified opinion (issuer) does the auditor refer to the standards of the PCAOB?
2nd paragraph under the basis of opinion section.
What should be included in the second paragraph under the Basis for Opinion section in the unqualified audit opinion (issuer)?
Audit conducted in accordance with PCAOB.
Obtain reasonable assurance
Audit included test and procedures
reasonable basis for opinion.
The auditor’s report should not be dated earlier than the date on which the auditor has obtained sufficient appropriate audit evidence. This should include evidence that what three things have occurred?
- reviewed audit documentation
- Prepared FS
- Mgmt takes responsibility.
What is the definition of a CAM?
A matter that was communicated or required to be communicated to the audit committee and that
- relates to material accounts or disclosures, and
- complex auditor judgement.
In determining CAMs, what factors should the auditor consider?
Assessment of the risks
Areas of significant judgement or estimates by mgmt
Nature and timing of unusal transactions,
Degree of subjectivity in audit procedures, and
Specialized skills in the matter.
In most audits of issuers, how many CAM will an auditor normally identify?
at least one.
For each CAM identified, what should the audit report of an issuer include?
IPAD ID of CAM Desc. of Principal How it was Addressed Disclosures reference.
What should the auditor of an issuer do if the auditor determines there are no CAMs?
State “ We determined that there are no CAMs”
When would an auditor use professional judgement to determine whether to issue a qualified opinion?
Material but not pervasive to the FS.
When would an auditor use professional judgement to determine whether to issue a adverse opinion?
Material and pervasive to the FS.
Describe the circumstances in which a material misstatement of the FS may arise.
appropriateness of accounting policies
application of accounting policies
appropriateness of the FS presentation
appropriateness of adequacy of disclosures in the FS.
Compared to a standard unqualifed opinion for an issuer, determine the paragraphs that are modified in an audit report when a qualified opinion are issued due to FS issues (Misstatement):
Opinion Section: Except for
Compared to a standard unqualifed opinion for an issuer, determine the paragraphs that are modified in an audit report when a adverse opinion are issued due to FS issues (Misstatement):
Opinion Section: Do not present fairly.
Is an auditor required to report on CAM when issuing an adverse opinion?
No
