A1 Unmodified (Unqualified) Opinion Flashcards
Module 4
14 elements of an auditor’s report
1) title
2) addressee
3) auditor’s opinion
4) basis of opinion
5) going concern - material uncertainty
6) key audit matters
7) other info
8) responsibilities for F/S
9) auditor’s responsibilities
10) other reporting responsibilities
11) name of the engagement partner
12) auditor’s signature
13) auditor’s address
14) date of auditor’s report
six elements of auditor’s opinion
1) entity whose F/S being audited
2) statement that F/S has been audited
3) title of each statement that F/S comprise and reference to notes
4) dates periods covered by each F/S that F/S made up of
5) “F/S present fairly in all material respects…” financial position of B/S date, results of op., cash flows, per reporting framework
6) identify applicable reporting framework and origin
three elements for basis for opinion
1) statement that in accordance with GAAS of USA
2) reference to section of auditor’s report to be independent and meet other relevant ethical requirements
3) statement that auditor believes evidence obtained is sufficient and appropriate to provide a basis for opinion
substantial doubt about entity’s ability to continue as going concern
-include if relevant
1) refers to note in F/S of conditions or events, mgmt’s plans to deal with events, and doubt exists if entity’s ability to continue for reasonable period
2) state’s auditor’s opinion not modified with respect to matter
key audit matters (when engaged)
1) KAM communicated to those charged with gov. and auditor’s professional judgment, most significant in audits of F/S in current period
2) matters addressed in context of audit of F/S as whole, no separate opinion on matters
description of each KAM include reference to related disclosures in F/S and address:
1) why matter considered to be one of most significant in audit
2) how matter was addressed in audit
exception: do not communicate matter in section in report if auditor required to modify opinion
responsibilities of mgmt for F/S
1) mgmt responsible for prep and fair presentation of F/S performance
2) design, implementation and maintenance of IC
3) going concern
six auditor’s responsibilities for audit of F/S
1) obtain reasonable assurance of F/S being free from error
2) reasonable assurance is high level of assurance but not absolute that material misstatements detected
3) risk of not detecting material misstatement from fraud is higher than one from error
4) statement that misstatements are considered material if substantial likelihood would influence judgment made by reasonable user of F/S
5) auditor exercise professional judgment, identify risk of mm of F/S, understand IC, evaluate accting policies, and going concern
6) statement auditor required to communicate with those charged with governance the planned scope, timing of audit, significant audit findings, and IC related matters
other info
1) statement that mgmt responsible for other info
2) identify other info and other info not in F/S and auditor report
3) auditor opinion not cover other info and no express opinion on it
4) statement that auditor responsible to read other info and whether material inconsistency exists between other info and F/S
5) if uncorrected misstatement, auditor required to report on it in auditor report
6) if uncorrected misstatement exists, describe in auditor report
other reporting responsibilities
-separate section of auditor’s report under “Report on Audit of F/S”
-“Report on other legal and regulatory requirements” follow the “Report on Audit of F/S”
date of auditor’s report
-auditor report dated no earlier than date on which auditor has obtained sufficient appropriate audit evidence on which to base auditor’s opinion on F/S such as:
1) all F/S, notes, have been prepared
2) mgmt has asserted it has taken responsibility for those F/S
audits with 2 sets of standards
-auditor can indicate audit was conducted in accordance with another set of auditing standards
-add language to basis of opinion paragraph
audits in accordance with GAAS and PCAOB standards
-conduct audit of PCAOB and not required to be conducted with those standards, auditor required to follow GAAS
-use report required by PCAOB
- amend PCAOB (issuer) report to state audit was also conducted in accordance with GAAS
GAAS vs GAAP
GAAS: basis for opinion and auditor’s responsibilities paragraphs
GAAP: mgmt’s responsibility and opinion paragraphs
what are key audit matters?
-matters of most significance in audit of F/S of current period
-selected from matters communicated to those charged with governance
-nonissuers determine whether to communicate KAMs with auditor and think of users of F/S needs
what should auditor’s consider for KAMs
1) areas with a higher assessed risk of material misstatement
2) significant auditor and mgmt judgment like accting estimates with uncertainty
3) significant events of transactions
KAMs up to professional judgment can include:
1) uncorrected misstatements
2) control deficiencies
3) attention of specialists
4) auditor encountered difficulties in applying procedures or evaluating results
5) complex or subjective items
reporting KAMs in auditor’s report
1) description of each matter in separate section of report
2) key audit matters title near opinion and basis for opinion section
3) why audit matter most significant and how addressed
-if auditor required to report KAMs, but none, state as such in subheading KAM
other reporting considerations for KAMs
-qualified opinion or going concern for period of time included in KAM and reference made to Basis for Opinion or Going Concern
-auditors prohibited from communicating KAM when adverse opinion or disclaimer of an opinion unless required by law or regulation
documenting KAM
-description of matters require significant attention and auditor’s determination of KAM
-auditor determination of no key audit matters
-auditor’s decision not to communicate a matter determined to be a KAM
unqualified opinion: issuer
1) title
2) addressee
3) opinion
what is included in opinion section of unqualified opinion
1) name of co. audited
2) statement identifying each F/S and any related schedule audited
3) period covered or date of each F/S and related schedule
4) statement indicating that F/S were audited
5) opinion that F/S fairly presented
basis for opinion section includes
1) statement that F/S are responsibility of co. mgmt
2) statement that auditor’s responsibility is to express opinion on F/S per audit
3) statement that auditor is CPA registered with PCAOB and independent of co per U.S, fed security laws and applicable rules and reg. of SEC and PCAOB
4) statement that audit conducted in accordance with standards of PCAOB
5) PCAOB require auditor obtain reasonable assurance on F/S
6) statement audit includes risks of mm, amts and disclosures in F/S, evaluating accting principles used and significant estimates made by mgmt and overall presentation of F/S
7) statement that auditor believes audit provides reasonable basis for auditor’s opinion
critical audit matter
a matter communicated or required to be communicated to audit committee and related to:
1) accts or disclosures material to F/S
2) involved challenging, subjective or complex auditor judgment
each CAM includes:
Identification of CAM
Principal considerations led to auditor to determine CAM
Addressed CAM in description for audit
Disclosures or accts relevant to F/S
other reporting requirements for CAMs
1) language viewed as disclaiming, restructuring, or minimizing auditor responsibility of CAMs on auditor opinion not appropriate
2) auditor not expected to provide CAM of co. if they have not been publicly available by co. unless info necessary to describe principal considerations led to auditor to determine CAM
3) F/S comparative basis, auditor CAM related to prior period F/S made public for first time, like initial public offering
4) issuing auditor’s report on prior period’s F/S because previous issued auditor’s report not reliable
5) CAM not required for audits of brokers, dealers, investment co. or employee stock etc.
mgmt reports on IC over financial reporting
1) report not required to be audited
2) basis of opinion include: whether auditor engaged to perform an audit of IC, required to obtain understanding of IC but not express opinion, and auditor does not express opinion on it (unless for issuers)
filing of form AP
-must file with PCAOB for each audit report that includes:
1) name of firm
2) name of issuers F/S audited
3) date of report
4) end of most recent period’s F/S identified in audit report
5) name of engagement partner on recent period’s and current and prior ID numbers
6) city and state of office of firm
7) audit report dual dated?
8) firm divided responsibility for audit?
9) signature of partner or authorized officer
when is AP form filed?
on the 35th day after audit report first filed in a doc. with SEC or within 10 days if audit report included in registration
optional inclusions
-can provide info about engagement partner or other accting firms participating in audit
1) include engagement partner full name
2) other accting firms describe auditor responsibility for work in accordance with PCAOB and info on total his audit firm participated in audit
