AUD 1 - Forming an Audit Opinion

Question 1

Define qualified opinion? Is it a GAAS or GAAP problem?

Answer 1

States that “EXCEPT FOR” the effects of the matter(s) to which the qualification relates, the financial statements are “PRESENTED FAIRLY”

• Can be either a GAAS or GAAP problem

Question 2

Define adverse opinion? Is it a GAAS or GAAP problem?

• Only used when problem is material AND pervasive

Answer 2

States that the financial statements “DO NOT PRESENT FAIRLY” the financial position in conformity with the applicable financial reporting framework

• GAAP problem

Question 3

Define disclaimer of opinion? Is it a GAAS or GAAP problem?

• Only used when problem is material AND pervasive

Answer 3

States that the auditor “DOES NOT EXPRESS” an opinion on the financial statements

• GAAS problem

Question 4

Define pervasive?

Answer 4

Very material

Question 5

Define the opinion for non or immaterial problems when:

1) Financial statements are materially misstated (GAAP problem)
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)

Answer 5

1) Financial statements are materially misstated (GAAP problem)
- Unmodified (unqualified) opinion
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)
- Unmodified (unqualified) opinion

Question 6

Define the opinion for material but NOT pervasive problems when:

1) Financial statements are materially misstated (GAAP problem)
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)

Answer 6

1) Financial statements are materially misstated (GAAP problem)
- Qualified opinion
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)
- Qualified opinion

Question 7

Define the opinion for material AND pervasive problems when:

1) Financial statements are materially misstated (GAAP problem)
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)

Answer 7

1) Financial statements are materially misstated (GAAP problem)
- Adverse opinion
2) There is an inability to obtain sufficient appropriate audit evidence (GAAS problem)
- Disclaimer of opinion