Audit Reports

Question 1

states that the financial statements are presented fairly in accordance with accounting principles generally accepted in the United States of America or an applicable financial reporting framework—the basic premise being that the auditor has tested the financials and they give an accurate representation of the company’s condition.

Answer 1

Unmodified Opinion

Question 2

What are the necessary requirements for an auditor to issue an Unmodified (Clean) Opinion?

Answer 2

1. No Significant departures from reporting framework
2. Reporting framework must be consistently applied
3. Adequate & complete disclosures
4. No significant uncertainties
5. No significant scope limitations
6. No significant going-concern problems

1-3 - no problems w/ the F/S (GAAP)
4-6 no problems w/ the audit (GAAS)

Question 3

If a CPA is going to provide any kind of assurance they must be…

Answer 3

Independent

Question 4

Goal of an audit…

Answer 4

provide reasonable assurance that financial statements are free from:

• material misstatement
• errors & fraud

Question 5

The introductory paragraph should list the…

Answer 5

• Financial statements
• time frame
• notes to the F/S

Question 6

Management’s Responsibility paragraph should state…

Answer 6

Management is responsible for:

• Preparation & fair presentation of F/S
• Design, implementation, & maintenance of I/C

Question 7

Auditor’s Responsibility paragraph should state…

Answer 7

Our responsibility is to express an opinion on the F/S…

• State the auditing standards used
• Goal is to obtain “reasonable assurance” that F/S are free from material misstatement
• Performed procedures to obtain audit evidence
• Auditor’s judgment used in risk assessments
• Internal Controls CONSIDERED, but NO opinion is expressed on the effectiveness of the entity’s internal controls
• Audit also includes evaluating:
  
  1. appropriateness of accounting policies
  2. reasonableness of significant estimates
  3. Overall presentation of the F/S

Question 8

The unmodified opinion paragraph should state…

Answer 8

• presented in all material respects
• the audit standards used
• date of the report

Question 9

What are the types of opinions issued when there is a significant GAAP departure in the F/S?
If material, __________
If pervasive, ___________

Answer 9

If material - “Except for” QUALIFIED Opinion

If pervasive - ADVERSE Opinion

Question 10

What are the types of opinions issued when there is a significant scope problem with the audit?
If material, __________
If pervasive, ___________

Answer 10

If material - “Except for” QUALIFIED Opinion

If pervasive - DISCLAIM Opinion

Question 11

What kind of opinion is associated with an entity that has a material going-concern problem?

Answer 11

UNMODIFIED Opinion (must also include a REQUIRED Emphasis-of-Matter Paragraph)

Question 12

What are the types of opinions issued when there are significant uncertainties discovered during the audit that cause a misstatement?
If material, __________
If pervasive, ___________

Answer 12

If material - “Except for” QUALIFIED Opinion

If pervasive - ADVERSE Opinion

Question 13

What are the types of opinions issued when there are significant uncertainties due to insufficient evidence?
If material, __________
If pervasive, ___________

Answer 13

If material - “Except for” QUALIFIED Opinion
If pervasive - DISCLAIM Opinion

(SAME THING AS A SCOPE LIMITATION)