A1 Forming an Audit Opinion

Question 1

three ways to form an opinion on F/S

Answer 1

1) sufficient appropriate audit evidence was obtained (required by GAAS)
2) uncorrected misstatements are material, individually, or in aggregate
3) F/S prepared in all material respects in accordance with financial reporting framework

Question 2

eight ways auditors should evaluate financial reporting framework (FRF)

Answer 2

1) F/S disclose significant accounting policies and description of FRF
2) accting policies consistent with framework
3) accting estimates and related disclosures by mgmt reasonable
4) info on F/S relevant, reliable, comparable, and understandable
5) F/S disclosures help users understand effect of material transactions and events on info conveyed in F/S
6) terminology in F/S appropriate
7) F/S fairly presented
8) F/S and disclosures represent transactions and events achieving fair presentation

Question 3

GAAS vs FRF

Answer 3

-GAAS provides guidance on how to perform audit
-FRF used to evaluate whether transactions and events achieving fair presentation

Question 4

unmodified (unqualified opinion)

Answer 4

1) F/S fairly presented in all material respects in conformity with FRF
2) unmodified for nonissuers and unqualified for issuers
3) can add additional info. in emphasis of matter, other matter, and explanatory paragraphs
4) nonissuers use emphasis of matter and other matter; issuers use explanatory

Question 5

when should an auditor’s opinion be modified?

Answer 5

1) auditor concludes that F/S as a whole are materially misstated OR
2) auditor unable to get appropriate audit evidence to conclude F/S are free from error

Question 6

qualified opinion

Answer 6

-except for effects of matters to which qualification relates, F/S presented fairly; material but NOT pervasive due to F/S materially misstated or insufficient audit evidence

Question 7

adverse opinion

Answer 7

F/S do not present fairly financial position and is pervasive and material due to F/S being materially misstated; departure from GAAP

Question 8

disclaimer of opinion

Answer 8

auditor does not express an opinion on F/S; material and pervasive due to inability to obtain sufficient audit evidence

Question 9

pervasive

Answer 9

when auditor’s professional judgment:
1) not confined to particular elements, accts, or items of F/S
2) if confined, represent a substantial proportion of F/S
3) are disclosures fundamental to users understanding of F/S