A1 M3 Forming an Audit Opinion

Question 1

What is an unmodified (unqualified) opinion?

Answer 1

F/S fairly presented in all material respects, to applicable financial reporting framework

Note: unmodified is for nonissuers and unqualified for issuers

Question 2

What is a qualified opinion?

Answer 2

“Except for the effects of the matter(s) to which qualification relates, F/S fairly presented in all material respects, to applicable financial reporting framework”

a modified opinion that is material but not pervasive due to F/S issues

Question 3

What is an adverse opinion?

Answer 3

“F/S do not fairly present in all material respects, to applicable financial reporting framework”

a modified opinion that is material and pervasive due to F/S issues

Question 4

What is a disclaimer of opinion?

Answer 4

Auditor does not express an opinion on F/S

a modified opinion that is material and pervasive due to audit issues

Question 5

What items should an auditor evaluate to form an opinion?

Answer 5

1) adequate disclosure of accounting policies and description of financial reporting framework
2) accounting policies consistent to framework
3) accounting estimates and disclosures of mgmt reasonable
4) disclosures help users understand effect of material transactions
5) info in F/S reliable, relevant, comparable and understandable

Question 6

What does pervasive mean?

Answer 6

impact specific elements, accounts, or items of F/S or substantial portion of F/S or disclosures fundamental to users’ understanding of F/S