A1 (Becker) Reports on Audited Financial Statements Flashcards
MR DIM REPPORTS CRAME
MANAGEMENT is RESPONSIBLE for the financial statements as well as the DESIGN, IMPLEMENTATION, MAINTENANCE of internal controls.
RESPONSIBILITY of the auditor is to
EXPRESS an opinion. The auditor
PLANS and
PERFORMS the audit to
OBTAIN evidence. The procedures selected include the assessment of
RISK. The auditors
TEST /considers internal controls relevant to preparation & fair presentation of
STATEMENTS in but does not express an opinion on the CONTROL.
An audit includes evaluating appropriateness and REASONABLENESS of significant ACCOUNTING estimates made by MANAGEMENT as well as EVALUATING overall presentation of f/s.
GAAP Problems w/ Financial Statements, Type of opinion to issue
1) Material - “Except for” Qualified
2) Very Material/Pervase - Adverse
GAAS Problems w/ Financial Statements, Type of opinion to issue
1) Material - “Except for” Qualified
2) Very Material/Pervasive/Significant - Disclaimer
False/Fraudulent/Deceptive/Misleading Problems w/ Financial Statements, Type of opinion to issue
Withdraw
How does an auditor ADMITS there’s a problem?
By examining the ANALYTICAL PROCEDURES
Reviewing DEBT COMPLIANCE & MINUTES from meetings. Make INQUIRIES of legal council and talking to THIRD parties about financial support.
Review SUBSEQUENT events
Company is FINE w/ regards to substantial doubt about going concerns
The auditor as looked for FINANCIAL difficulties
INTERNAL matters
NEGATIVE trends and
EXTERNAL matters.
Mitigating factors to going concern
1) Borrow $$$/restructure debt
2) Sell assets
3) Delay/reduce expenditures
4) Increase ownership equity
How do DORCS change their mind on on opinion?
DATE of previous report OPINION previously stated REASON for prior opinion CHANGES that have occurred STATEMENT that the opinion is different
If the predecessor auditor’s work is presented in comparative statements, OLD CPA should:
**Dates used?
1) Read statements of current period
2) Compare statements audited w/ current stmts
3) Obtain rep letter from successor
5) Inquire/obtain rep letter from mgmt
- *Can use unrevised date (no change)
- *Can dual date (if auditor revises report)
If the predecessor auditor’s work is NOT presented in comparative statements, NEW CPA should:
Express an opinion on current statement only in other-matter paragraph that includes:
1) Financial statements of prior period audited by predecessor w/o naming
2) Type of opinion expressed and reasons if modified
3) Nature of any emphasis-of-matter/other-matter paragraph
4) Date of predecessor’s report
Prior period statement reviewed/compiled when presented in comparative statements, CPA should:
Include an other-matter paragraph that includes:
1) Service performed in prior period
2) Date of report
3) Description of any material modifications describes
4) Statement that service was less in scope. Does not provide basis for expressing an opinion
Prior period statement NOT audited, reviewed or compiled when presented in comparative statements, CPA should:
Include other-matter paragraph stating no work done and assume no responsibility for them.
Auditor’s PRIME responsibility for subsequent events is to:
1) Review POST balance sheet transactions
2) Obtain REP letter from mgmt
3) Make INQUIRIES about subsequent events that could affect f/s
4) Read MINUTES on meetings
3) EXAMINE interim financial statements
Dual Dating extends responsibility …?
only for the particular subsequent event!!!
How can a auditor DAR the client to fix financial statements when subsequent discovery of facts arises?
1) Disassociate w/ financial statements
2) Alert agencies that have jurisdiction over client
3) Relying parties of financial statements are notified
