A3 Forming An Audit Opinion

Question 1

Forming An Opinion

Answer 1

When an auditor is forming an opinion they need to consider a variety of factors including compliance with financial reporting framework, sufficiency and appropriateness of audit evidence, going concerns, internal control system, related part transactions, disclosure & presentation.

Question 2

Applicable Framework

Answer 2

Auditor should access whether the applicable financial reporting framework such as GAAP, IFRS, Cash Basis, Tax Basis

Question 3

Unqualified/Unmodified Opinion

Answer 3

Most favorable opinion that indicates the FS present fair view in all material respects in accordance with applicable reporting framework.

Question 4

Qualified Opinion

Answer 4

Auditor concludes the FS are presented fair but has certain issues. Although those issues are not pervasive enough tp necessitate an adverse opinion.

Question 5

Adverse Opinion

Answer 5

Severe type of opinion issued when the auditor concludes the FS do not present a fair view and are materially misstated.

Question 6

Disclaimer Opinion

Answer 6

Auditor is unable to obtain sufficient appropriate audit evidence and concludes that the possible effects could be both pervasive and material. A disclaimer means the auditor does not express an opinion on the FS.

Question 7

Emphasis of Matter Paragraphs

Answer 7

Used to draw attention to a matter appropriately presented or disclosed in the FS. These are of such importance that is fundamental to users. EOMs are also used when there are going concerns, significant accounting estimates, subsequent events, and uncertain events (litigation).

Question 8

Other Matter Paragraphs

Answer 8

Used to draw attention to a matter about the audit that is not disclosed but is relevant to the user’s understanding. OMs are also used to disclose audited financials from prior period done by another auditor, indicate supplementary info, or other info not included elsewhere in the report.

Question 9

Auditor’s Opinion Section

Answer 9

Indicates the type of audit, FS covered, name of the entity, dates covered. US GAAP is highlighted here. If Inadequate disclosure has a material but not pervasive effect on the FS, this section should state “In our opinion, except for the omission of the described in the basis for qualified opinion section report”.

Question 10

Basis of Opinion Section

Answer 10

References GAAS, auditor independence, sufficiency of appropriate evidence, and applicable reporting framework used. For issuers, PCAOB standards are indicated in this section.

Question 11

Auditor’s Responsibility

Answer 11

Details what the auditor does which includes their role & expressing an opinion (said in the 1st sentence).

Question 12

Critical Audit Matter

Answer 12

Matter that was communicated to audit committee and involves an especially challenging judgement made by the auditor.