A1 Modified Opinions Due to F/S Issues

Question 1

when is a qualified opinion expressed?

Answer 1

auditor concludes misstatements, individually or in aggregate, are material but not pervasive

can express qualified opinion when F/S materially misstated or unable to obtain sufficient audit evidence

Question 2

when is an adverse opinion expressed?

Answer 2

auditor concludes misstatements, individually or in aggregate, are material and pervasive

express when F/S are materially misstated, if unable to obtain audit evidence it’s a disclaimer of opinion

Question 3

when does a material misstatement of F/S arise?

Answer 3

1) appropriateness of accounting policies
2) application of accounting policies
3) appropriateness of F/S presentation of adequacy of disclosures

Question 4

material misstatements of accounting policies

Answer 4

1) accting policies not aligned with reporting framework
2) F/S do not represent transactions that achieve fair presentation
3) entity not complied with financial reporting framework and disclosing changes in accting policies

Question 5

material misstatements of application of accounting policies

Answer 5

1) mgmt not applied policies to framework
2) mgmt not applied policies consistently between periods or transactions
3) error in application of policies

Question 6

material misstatements related to appropriateness of F/S presentation or disclosures

Answer 6

1) F/S does not include all required disclosures
2) disclosures not presented in accordance with framework
3) F/S not include disclosures to achieve fair presentation
4) info required to be presented not included in F/S (ex. statement of cash flows)

Question 7

what kind of opinion should be made if statement of cash flows are omitted?

Answer 7

a qualified opinion

Question 8

how is the qualified opinion stated?

Answer 8

“in auditor’s opinion, except for matters described in Basis for Qualified Opinion section of auditor’s report, F/S are fairly presented”

Question 9

what is included in Basis for Qualified Opinion?

Answer 9

description of matter that gives rise to a modification

Question 10

what does practicable mean?

Answer 10

info reasonably obtainable from mgmts accts and records and providing info not require auditor to assume preparer of F/S

Question 11

how is the adverse opinion stated?

Answer 11

“in the auditor’s opinion, because of the significance of matters described in Basis of an Adverse Opinion, the F/S do not present fairly in accordance with applicable financial framework”

Question 12

what is included in Basis for Adverse Opinion?

Answer 12

section amended to include description of matter giving rise to modification; same as qualified opinion

Question 13

is a critical audit matters or key audit matters included in an adverse opinion? qualified opinion

Answer 13

No

Yes

Question 14

opinion section of the qualified opinion

Answer 14

section title and first sentence are same as standard issuer audit report

second sentence uses “except for or with the exception of” and reference to paragraph that discloses all of qualified opinion

Question 15

additional paragraphs for qualified opinion

Answer 15

follows the opinion paragraph with no heading and includes:

1) all substantive reasons that lead auditor to conclude that there has been departure from GAAP
2) disclosure of principal effects of subject matter of qualification on financial position, results of operation, and cash flows
-if effects not reasonably determinable, report should state so
-if disclosures made in note to F/S, explanatory paragraphs shortened to refer to it

Question 16

additional paragraphs for adverse opinion

Answer 16

same as for a qualified opinion