Audit Reports

Question 1

Non issuer audits are subject to what governing board?

Answer 1

Auditing Standards Board

Question 2

What are the objectives of an audit of financial statements according to AU-C 200 (clarified auditing standards)

Answer 2

1. Get reasonable assurance that the financial statements are free from material errors. Once it is, the auditor can give opinion on whether it was done according to whatever framework it was supposed to follow. ie GAAP

Question 3

Name the three inherent limitations of an audit.

Answer 3

1. The nature of financial reporting
2. The nature of audit procedures
3. Timeliness of financial reporting and the balance having it being cost effective.

Question 4

When should the auditor give a modified opinion?

Answer 4

1. When there is a material misstatement (GAAP issue)
2. When there’s not audit evidence to support that the financials are free from material misstatement.

Question 5

What is included in the unmodified (unqualified) opinion [non issuer] report.

Answer 5

1.The name of entity
2. Name of each report provided
3. The period under audit
4. Notification that the financial statements were audited
5. Statement saying that all the reports are presented fairly, without material misstatement, and is prepared according to the applicable framework.

Question 6

What are the sections of an unqualified opinion [issuer]

Answer 6

1. Title
2. Addressee
3. Opinion section
4. Basis of Opinion
5. Signature, tenure, and location
6. Report date

Question 7

What is an assertion and how does it play out in an audit?

Answer 7

Assertions are the basis of the audit process. Assertions are underlying claims that management makes about their financials statements. Auditor uses assertions to perform audit procedures.

Question 8

There are 2 categories of assertions. List each.

Answer 8

1. Account balances and related disclosures (Each category has 6 assertions)
2. Classes of transactions and events, related disclosures (6 assertions)

Question 9

What are the 6 assertions for account balances and related disclosure.

Answer 9

1. Existence
2. Rights and obligations
3. Completeness
4. Accuracy, valuation, and allocation
5. Classification
6. Presentation

Question 10

Name 6 assertions for the classes of transaction and events and related disclosure.

Answer 10

1. Occurrence
2. completeness
3. accuracy
4. classification
5. presentation

Question 11

When there is a limitation in the scope of an audit, what are the two opinions that could result due to the limitation?

Answer 11

Auditor can issue a qualified opinion (material but not pervasive) or disclaim an opinion (material and pervasive)

Question 12

If the misstatement is material and pervasive, what kind of opinion did the auditor issue?

Answer 12

Disclaimer of opinion

Question 13

If the misstatement is just material but not pervasive, what opinion did the auditor issue?

Answer 13

Qualified opinion

Question 14

If there is a disclaimer of opinion, should the auditor include a CAM?

Answer 14

CAM (critical audit matters) are not required for a disclaimer of opinion