AUD - Reports Flashcards
What are the basic elements of an unmodified report?
- Title: Independent Auditor Report
- Addressee: addressed as required by the circumstances of the engagement
- Auditor’s Opinion: The heading should be “Opinion”
- Basis of Opinion: The heading should be “Basis for Opinion”
- Substantial Doubt About the Entity’s ability to continue as a Going Concern (when relevant): Only use when relevant, the heading should be “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern”
- Key Audit Matter (when engaged) - When engaged to communicate key auditor matters, the auditor should describe each key audit matter using an appropriate heading. The title should be “Key Audit Matters”
-Note, auditor should not communicate a matter in this section when the auditor is required to modify the opinion as a result of the matter - Responsibilities of Management for the FS: header is “Responsibilities for the FS”
- Auditor’s Responsibilities for the Audit of the Financial Statement - header is “Auditor’s Responsibilities for the Audit of the Financial Statements”
- Other Information (when relevant) - header is “Other Information”
- Other Reporting Responsibilities - header is “Report on Other Legal and Regulatory Responsibilities” or otherwise appropriate title
- Signature of the Auditor - either manual or printed signature
- Auditor’s Address - should name the city and state where the auditor’s report is issued
- Date of Report - should be no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence
For an non issuer’s unmodified report, what is stated in the Auditor’s opinion section?
The auditor’s report should include a section with the heading “Opinion” that includes:
-the entity whose FS have been audited
-statement that the FS have been audited
-the title of each statement the Financial Statements and reference to the notes
-Dates or periods covered by each financial statement
-Statement that in the auditor’s opinion, the FS present fairly in all material aspects….
-identification of the applicable financial reporting framework and its origin
For an non issuer’s unmodified report, what is stated in the Basis of Opinion section?
header “basis for opinion”
-a statement that the audit was conducted in accordance with generally accepted auditing standards and identifies the USA as the country of origin
-A reference to the section of the auditor’s report that describes auditor resp. under FAAS
-A statement that the auditor is required to be independent and to meet other relevant ethical requirements
-A statement as to whether the auditor believes that the evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion
For an non issuer’s unmodified report, what is stated in the Substantial Doubt About the Entity’s Ability to Continue as a Going Concern section (when relevant)?
Header “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern”
-Draws attention to the note in the FS that discloses the conditions or events identified, mgmt’s plan to deal with
-States that the auditor’s opinion is not modified with respect to the matter
For an non issuer’s unmodified report, what is stated in the Key Audit Matters section (when engaged)?
header “Key Audit Matters”
-The description of each key audit matter should include a reference to the related disclosures, if any, in the financial statements, and should address the following:
-why the matter was considered to be one of the most significant in the audit
-how the matter was addressed?
For an non issuer’s unmodified report, what is stated in the Responsibilities of Management for the FS?
header “Responsibilities of Management for the FS”
-an explanation mgmt is responsible for the preparation and fair presentation of FS, free from material misstatements,
-statement that this responsibility includes the design, implementation and maintenance of IC relevant to the preparation and fair presentation of the FS
-When required, the evaluation of whether there are conditions or events that raise substantial doubt about the entity’s agility to continue as a going concern
-WHEN REQUIRED, the evaluation of whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
For an non issuer’s unmodified report, what is stated in the Responsibilities of Auditors for the audit for the FS?
header “Auditor’s Responsibilities for the Audit of the FS”
-Statement that the objectives of the audit are to obtain reasonable assurance about whether the FS are free from material misstatements
-Statement that reasonable assurance is a high level of assurance but is not absolute, etc
-Statement that the risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, etc
-Statement that misstatements are considered material if there is substantial likelihood, individually or in the aggregate, they would influence the judgment of a reasonable person
-description of the audit that states the auditor’s responsibilities:
-exercise professional judgment and maintain
professional skepticism
-Identify and assess the risk of material misstatements
of the FS, whether due to error or fraud, and design
and perform audit procedures responsive to those
risks
-Obtain and understanding of internal controls…… but
not for the purpose of expressing an opinion (2nd part
omitted when auditor has responsibility to express
opinion on internal controls.
-evaluate the appropriateness of the accounting
policies used and the reasonable of significant
accounting estimates made by management
-Conclude whether, in the auditors judgement, there
are conditions or events that raise substantial doubt
about the entity’s ability to continue as a going
concern
An emphasis-of-matter paragraph is used when…
(1) the matter is fundamental to users’ understanding of the statements,
(2) the auditor considers that drawing users’ attention to the matter is necessary, and
(3) the matter is appropriately presented and disclosed in the statements.
The auditor has a substantial doubt about the firm’s ability to continue as a going concern for a reasonable period of time. Accordingly, the auditor should include a separate section..
What should be the heading?
What language is generally included?
Header of paragraph: Substantial Doubt About the Entity’s Ability to Continue as a Going Concern in the report.
This language should include the terms “substantial doubt” and “going concern.” The specific phrases included in the question are not required.
Does the correction of a material misstatement in previously issued financial statements require an emphasis of matter paragraph or other matter paragraph in the auditors report?
A correction of a material misstatement in previously issued financial statements requires the auditor to include an emphasis-of-matter paragraph.
When a change in accounting principle has a material effect on comparability, the auditor should add an emphasis-of-matter paragraph that
(1) uses the heading Emphasis of Matter, (2) describes the change in principle, (3) refers to the entity’s disclosure, and (4) indicates that the opinion is not modified with regard to the matter emphasized.
What type of report modification is required when Other information presented with the audited statements contains material inconsistencies?
A separate section titled Other Information is included in the auditor’s report to describe the material inconsistencies.
The auditor who reports on SI should determine that
(1) the underlying financial statements were audited, and
(2) the auditor’s report did not express an adverse opinion or disclaim an opinion.
What is an auditor’s responsibility for required supplementary information (RSI)?
The auditor at minimum should apply limited procedures and report on the RSI in a separate section in the auditor’s report on the financial statements. The auditor should include but not modify the opinion.
An entity prepares its financial statements on its income tax basis. The accompanying notes include a summary of significant accounting policies that discusses the basis of presentation and describes how that basis differs from GAAP. The dollar amount of the effects of the difference between the income tax basis and GAAP, should be included in the auditors report and or the footnotes?
Need not be quantified and included in either the notes to the financial statements or the auditor’s report.
