A1-Reporting with Different Opinions and Other Auditors

Question 1

Which FS and periods are included in the Opinion paragraph when reporting Unmodified opinion in CY with Disclaimer opinion in PY (Nonissuer)?

Answer 1

• indicate BOTH BS of CY and PY
• indicate IS, changes in SE, and CF statements for CY only

Then adding the “Disclaimer of Opinion on PY operation and cash flows” paragraph before basis for opinion paragraph

Question 2

Which FS and periods are included in the Opinion paragraph when reporting Unqualified opinion in CY with Disclaimer opinion in PY (Issuer)?

Answer 2

• indicate BOTH BS of CY and PY
• indicate IS, changes in SE, and CF statements for CY only

Then adding a paragraph using phrase “…Because of the matter discussed in the following paragraph, we were not able to obtain sufficient appropriate audit evidence to …” before basis for opinion paragraph. Under, Basis for Opinion paragraph, use phrase “Except as explained above…”

Question 3

What opinion should auditors express when PY’s FS were not audited and the CY’s FS are being audited?

Answer 3

In this case, auditors are facing a scope limitation. the beginning balances may not be ascertainable and therefore auditors should express a DISCLAIMER opinion on IS, SE, and CF statements.

Question 4

What is the format to update (change) prior opinions?

Answer 4

• if updated opinion differs from the previous opinion, the auditors should disclose the reasons in an emphasis-of-matter or other-matter paragraph (nonissers) or explanatory paragraph (issuers)
• format as following:
  D as Date of the auditor’s previous report
  O as Opinion type previously issued
  R as Reason for prior opinion
  C as Changes that have occurred
  S as Statement that the “opinion…is different”

Question 5

What should a prior CPA (predecessor) do when deciding whether to reissue their report?

Answer 5

• Read the statements for the current period
• Compare the statements audited with the current period statements
• obtain a letter of representation from the successor auditor
• Inquire of and obtain a letter of representation from management at or near the date of reissuance
• Date the report as appropriate: unrevised (original report date); revised (dual date)

Question 6

When may DUAL DATE be used in the report by the auditor?

Answer 6

the auditor may dual date the report if a material SUBSEQUENT EVENT has occurred, but dual date is not used for reissuing a report

Question 7

What should a current CPA (successor) indicate when a predecessor auditor’s report is not presented?

Answer 7

• indicate that the statements were expressed by the predecessor auditor. The predecessor should not be named unless the practice of the predecessor was acquired by or merged with that of the successor.
• indicate the type of opinion expressed by the predecessor. if the opinion was modified/qualified, state the reasons for the modification
• indicate the nature of any emphasis-of-matter, other-matter, or explanatory paragraph included in the predecessor auditor’s report
• indicate the date of the predecessor auditor’s report

Question 8

what is a component in audit?

Answer 8

it is an entity or business activity that prepares financial information that is included in the group financial statements

Question 9

what is a component auditor?

Answer 9

an auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit. a component auditor may be part of the group engagement partner’s firm, a network firm, or another firm

Question 10

what is a group engagement partner?

Answer 10

the group engagement partner (private company used AICPA)/principal auditor (public co used by PCAOB) is a partner or other person in the firm who is responsible for the group audit engagement

Question 11

what is group financial statements?

Answer 11

are financial statements that include the financial information of more than one component

Question 12

what is the general rule about reporting audit with other auditors?

Answer 12

• if the group engagement partner is SATISFIED as to the INDEPENDENCE and the professional reputation of the component auditor, the group partner may express an opinion as a whole WITHOUT MAKING REFERENCE to the audit of the component auditor
• If NOT independence, the group engagement team should first attempt to obtain sufficient appropriate audit evidence relating to the financial information of the component WITHOUT making reference to or using the work of the component auditor

Question 13

what a cpa firm should do when decided to rely on audit work of another cpa firm?

Answer 13

• should not reference the other cpa firm
• should review the other’s firm’s audit workpapers and reperform subset testing to validate the firm’s conclusions

Question 14

in which paragraph an auditor would make reference of other auditor’s audit?

Answer 14

Opinion paragraph