Audit Reports Flashcards
when to use disclaimer of opinion?
when a scope limitation prevents the auditor from obtaining sufficient audit evidence to support an opinion
auditor issues disclaimer of opinions to reflect the inability to obtain sufficient appropriate audit evidence
On which date should an auditor’s report be dated
on and after date when sufficient appropriate audit evidence is obtained.
when to issue disclaimer of opinion
When a CPA is associated with the financial statements of a public entity without auditing or reviewing the information
in the opinion paragraph, if there’s scope limitation, how would it be worded?
the wording in the opinion paragraph should indicate that the qualification pertains to the possible effects to the financial statements, not the scope limitation itself
Inadequate disclosure of necessary information is a departure from
GAAP
when does auditor need to be independent
when giving assurance:
examination (audit), reviews, agreed upon procedures, special reports
ERAS
when to access risk of fraud
in audit
review report gives:
limited assurance, not opinion
A review consists primarily of
inquiries and analytical procedures
can accountant do compilation if they’re not independent?
Yes as long as the report clearly indicates that the CPA is not independent.
accountant should disclose lack of independence in accountant’s independence report
An auditor’s responsibilities are confined to
expressing an opinion on the financial statements
- Management, not the auditor is responsible for adopting sound accounting policies
the basic unmodified audit report for a nonissuer consists of 4 paragraphs
- The introductory or report on the financial statements paragraph
- management’s responsibility paragraph
- auditor’s responsibility paragraph and
- the opinion paragraph
how to report going concern doubt
in emphasis of a matter paragraph after opinion paragraph
use the terms “substantial doubt” and “going concern”
It refers to the Note in the financial statements, and also specifically mentions the words “going concern” and “substantial doubt”.
how to report going concern doubt if entity’s financial statements adequately disclose its financial difficulties
auditor will provide an unmodified report with an emphasis of matter paragraph, following the opinion paragraph, drawing attention to the disclosure of the going concern issue.
if it was NOT disclosed: qualified or adverse opinion
Where is GAAS and GAAP mentioned on auditor’s report?
GAAS: auditor’s responsibilities
GAAP: opinion paragraph
when theres scope limitation what should auditor issue?
qualified or disclaimer of opinion, depending on materiality and pervasiveness
material not pervasive: qualified
material AND pervasive: disclaimer of opinion
when to give adverse opinion
departure from GAAP
no disclosure
if theres material misstatement
what date to use if there’s reissue of report and there’s no changes and auditor does not reword the report
Use the original report date on the reissued report
how to report going concern doubt if entity’s financial statements do NOT disclose it in its financial difficulties
qualified opinion or adverse
omission of required fs
departure from GAAP = qualified opinion
when qualifying an opinion because of an insufficiency of audit evidence, an auditor should refer to the reasons in
separate paragraph ABOVE opinion paragraph
refers the reader to the preceding “basis-for-modified opinion” paragraph
when there’s lack of consistency in accounting principle that WAS properly accounted for and disclosed, auditor should report where:
in paragraph AFTER opinion paragraph
when there’s lack of consistency in accounting principle that was NOT properly accounted for and disclosed, auditor should report where:
in paragraph BEFORE opinion paragraph
“basis for the qualification”
order of paragraphs in auditor’s report
- introductory paragraph
- management’s responsibilities
- auditor’s responsibilities
- basis for _____ opinion
- opinion
- emphasis of a matter (includes going concern)
completed field work on 3/6. then changes to fs before report is issued on april 10. no disclosure.
what date should be used?
3/6
completed field work on 3/6. then changes to fs before report is issued on april 10. there IS disclosure.
what date should be used?
If the event is disclosed or if the auditor qualifies the opinion, the report may be dual dated or may be dated as of the later date
On which date should an auditor’s report be dated
On or after the date sufficient appropriate audit evidence was obtained
comparative form: using predecessor’s f/s without auditor’s report. it was qualified. how to draft current report?
- add other-matter paragraph to current report
- should include info of previous report
- should indicate another auditor audited prior fs
- indicate date of report
- type of opinion issued
- reason for opinion (if other than unmodified)
other matter paragraph
used to provide info that is not required to be reported or disclosed in the financial statements that will enhance users’ understandings of the audit or the audit report
ex: omission of quarterly report to SEC
emphasis of a matter
material change in accounting principles, if properly disclosed
is for matters appropriately disclosed in the financial statements that the practitioner merely wants to emphasize
Management does not provide reasonable justification for a change in accounting principles
qualified or adverse opinion
potential departure from GAAP
when to dual date
Dual dating is only appropriate when there is a subsequent event.
can take responsibility for events up through the original date and only accept responsibility for the specific event by using dual dating
when qualified opinion due to scope limitation
When an auditor qualifies his or her opinion due to a scope limitation, the wording in the opinion paragraph should indicate that the qualification pertains to the “possible effects to the financial statements”
qualified opinion
departure from GAAP
but not pervasive such that it resulted in a material misstatement
did not affect the fairness of the financial statements taken as a whole
address auditor’s report to who
board of directors
shareholders
NOT MGMT
opinion of unmodified report paragraph includes
indicates that the financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the entity in conformity with the applicable financial reporting framework
5 basic types of opinion
- unmodified report (clean)
- unmodified report w emphasis of a matter/other matter
- qualified opinion (fs present fairly, except for)
- adverse opinion (fs not present fairly)
- disclaimer of opinion (we do not express an opinion)
unmodified vs unqualified
AICPA uses unmodified (international)
PCAOB uses unqualified
title of audit report
must have word ‘independent’
intro paragraph of audit report
first paragraph
- ID the entity whose fs has been audited
- state fs has been audited
- name the fs being audited
- specify date/periods being audited
second paragraph of audit report
mgmt’s responsibility for financial statement:
- mgmt respon. for preparation of fair presentation of fs
- design, implementation, and maintenance of internal control
3rd paragraph of audit report
auditor’s responsibility
- to express opinion based on audited fs
- audit was conducted in GAAS
- reasonable assurance free of material misstatement
- describes an audit: procedures to get audit evidence, about the amounts and disclosure in fs, assessment of RMM, entity’s internal control, appropriateness of accounting policies, reasonableness of estimates, overall presentation of fs
4th paragraph of audit report
auditor’s opinion (if unmodified)
- express opinion
- fs fairly presented
- cash flow in accordance with ‘applicable financial reporting framework (AFRF): financial position of entity as of bs date,
- mention GAAP or OCBOA
is internal control mentioned in the auditor’s report of non govt
Although the report does indicate that the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements, there is no mention of the entity’s internal control STRUCTURE.
The condensed financial statements are a
supplementary filing and would not be compared to themselves for determining if they are fairly stated.
Since they are derived from the audited financial statements, the auditor would indicate that they are fairly stated in relation to those financial statements.
Condensed financial statements do not conform to GAAP, but also are not prepared in accordance with an OCBOA
