AUD 1.4 - Unmodified / Unqualified Opinion Flashcards
What is the flow of contents for the unqualified opinion audit report?
(Issuers; Public companies; PCAOB)
1.“report of independent registered public accounting firm” title
2. Addressee of shareholders and board of directors
3. Opinion section
4. Basis for opinion section
5. Critical audit matters (CAM)
6. Signature of the firm, tenure of the partner, & location of firm
7. Report date
The opinion section of the audit report for an unqualified opinion includes:
- “Opinion on the financial statements” title
- Name o company being audited
- Each financial statement and related schedules that were audited
- Date of or period covered
- Statement noting financial statements were audited
- An opinion and the applicable framework
The basis for opinion section of the audit report for an unqualified opinion includes:
- Statement of managements responsibility
- Statement of auditors responsibility
- Statement that auditor is a public accounting firm registered with the PCAOB
- Statement that audit conducted in accordance with PCAOB
5 “PCAOB standards require the auditor plan & perform to obtain reasonable assurance free of material misstatement” - “Perform procedures to assess the risk of material misstatement”
- “Examining evidence”
- “Evaluating the accounting principles used and significant estimates made by management”
- ”Evaluating overall presentation”
The critical audit matters section of the auditor’s report for an unqualified opinion should include:
Discussion of any critical audit matters from the current period audit, or state that there were no CAMs
For each CAM identified, the audit report should include:
(IPAD)
- Identification of the CAM
- Principal considerations that left the auditor to determine that the matt was a CAM
- How the CAM was addressed
- Reference the relevant accounts or disclosures
Reporting of CAMs is not required for what 4 audits?
- Brokers and dealers reporting under the Exchange Act Rule 17a-5
- Investment companies registered under the investment company act of 1940
- Employee stock purchase, savings, and similar plans
- Emerging growth companies
When answering questions concerning the unqualified audit opinion (issuer), remember where PCAOB Audit standards and GAAP are referenced in the report:
PCAOB standards = basis for opinion section
GAAP (or other applicable frameworks) = opinion on the financial statement section
What is a Form AP and why is it filed?
It is filed by an auditor with the PCAOB for each audit report issued for public companies.
What does a Form AP include?
- Name of the firm, partner, and issuer company
- Date of audit report and end date of most recent periods financial statements being audited
- Location of firm office
- Whether the audit report was dual dated
- Whether other accounting firms participated in the audit
- Whether the firm divided responsibility for the audit
- Signature of partner or authorized officer
MUST be filed within 35th days after the audit report is filed with the SEC OR within 10 days if audit report included in registration statement.
Key audit matters are used for who?
Critical audit matters are used for who?
KAMS = private companies
CAMS = public companies
What is the flow of contents of an Unmodified independent auditors report for a nonissuers?
(Private company)
- Title
- Addresse
- Auditors opinion
- Basis for opinion
- Substantial doubt about the entity’s ability to continue as a going concern
- KAMS
- Responsibilities of management
- Responsibilities of the auditors
- Other information (if relevant)
- Other reporting responsibilities
- Signature of the auditor, auditors address and date of audit report
When answering questions concerning the unmodified audit opinion (nonissuer), remember where GAAS Audit standards and GAAP are referenced in the report:
GAAS is referenced in the auditors responsibility paragraph
GAAP is referenced in the management responsibility paragraph and opinion paragraph
An auditor is prohibited from including KAMS in the auditors report (nonissuer) when? I
When expressing an adverse opinion
Are KAMS required to be included for nonissuers?
No
