Audit Reports - Pre-Clarity Flashcards
Must conform to GAAP
Consistency with prior period reporting is implied (must state if inconsistent)
Adequacy of disclosure is implied (must state if disclosures are lacking)
Opinion is provided - provides assurance
Must be signed by the auditor and dated.
Audit Reports - Pre-Clarity Project
If inconsistent- an Unqualified Opinion is OK
Explanatory paragraph after Opinion is added
Otherwise - Qualified Opinion issued
Audit Reports - Pre-Clarity Project
Accounting Errors
Reclassifications
Prospective treatment of a new principle
Accounting Estimate Change
Audit Reports - Pre-Clarity Project
The opinion states that the financial statements are fairly presented in all material respects
The opinion states if the financials are in conformity with GAAP.
Audit Reports - Pre-Clarity Project
Title - States that the auditor is independent
Address - whomever hired the auditor
Introduction Paragraph
Scope Paragraph
Opinion Paragraph
Signed and Dated by Author
Audit Reports - Pre-Clarity Project
GAAS was followed (IF SEC company- uses the standard of the PCAOB)
Reasonable assurance about material misstatements was obtained.
Financial statements and disclosures are supported by evidence.
Management estimates evaluated
Accounting principles evaluated
Financial Statement presentation evaluated
Reasonable basis exists for an opinion
If any scope limitations exist- the auditor tries to work around them and still issue an unqualified opinion if possible.
Audit Reports - Pre-Clarity Project
A prior year’s Financial Statement used for comparative purposes must also meet criteria for an Unqualified Opinion
If an exception arises- the Explanatory and Opinion paragraphs will address the issue
If a prior year’s issue has been corrected - issue an Unqualified opinion and ignore the past issue
Audit Reports - Pre-Clarity Project
Includes:
Immaterial GAAP issues
Going Concern worries
Auditor shares responsibility
Emphasizing a particular aspect of Financial Statements
Unqualified Opinion/Assurances not affected
Explanatory paragraph added after opinion
Audit Reports - Pre-Clarity Project
A qualified opinion creates reduced assurances.
It results from scope limitations or major inconsistencies.
It includes material problems with GAAP- disclosures- or segment reporting.
If there is an issue that causes a Qualified Opinion- the explanatory paragraph goes after the Scope and before the Opinion paragraphs and the Opinion paragraph refers to the issue as well.
Audit Reports - Pre-Clarity Project
Qualified opinion is issued.
Scope paragraph modified
Explanatory paragraph between Scope and Opinion paragraphs
Opinion paragraph points out scope limitation
Audit Reports - Pre-Clarity Project
Qualified opinion is issued.
Scope paragraph remains unchanged
Explanatory paragraph between Scope and Opinion paragraphs
Opinion paragraph points out inconsistency
Audit Reports - Pre-Clarity Project
States that an opinion cannot be issued.
Includes severe Scope limitation
Audit Reports - Pre-Clarity Project
Very material GAAP and Disclosure issues would cause an Adverse Opinion.
If there is an issue that causes an Adverse Opinion- the explanatory paragraph goes after
the Scope and Before the Opinion paragraphs and the Opinion paragraph refers to the issue as well
Audit Reports - Pre-Clarity Project
Disclosed in Introductory Paragraph.
Doesn’t name the other auditor without permission.
Referenced in Opinion paragraph and division of responsibility indicated
If other auditor is not referenced- then you take responsibility for their conclusions- so consideration of independence- experience- credentials- etc required
Audit Reports - Pre-Clarity Project
Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services)
Audit Reports - Pre-Clarity Project
Non-SEC (non-public) registrants only.
Audit Reports - Pre-Clarity Project
Accountant puts together financial statements with information PROVIDED BY MANAGEMENT.
No opinion is expressed- and no assurances are given.
Independence is not required.
Audit Reports - Pre-Clarity Project
Disclosures not necessary must state that they are not included
Audit Reports - Pre-Clarity Project
SSARS (Statements on Standards for Accounting and Review Services)
Audit Reports - Pre-Clarity Project
Reviews give limited assurance.
Audit Reports - Pre-Clarity Project
Analytical procedures are required for reviews.
Compare results to documented predictions.
Audit Reports - Pre-Clarity Project
Financial statements are presented with no opinion expressed- and limited assurances are given.
Independence is required for a review engagement.
Audit Reports - Pre-Clarity Project
A prospective financial statement that uses normal circumstances.
General and limited use allowed.
Audit Reports - Pre-Clarity Project
A prospective financial statement using hypothetical situations.
Only limited use by the client is allowed.
Audit Reports - Pre-Clarity Project
Independence is required
Only limited use by the client is allowed.
Audit Reports - Pre-Clarity Project
No disclosure required.
Audit Reports - Pre-Clarity Project
Accrue if estimable.
Explanatory paragraph if not estimable.
Audit Reports - Pre-Clarity Project
Auditor assesses need for explanatory paragraph based on loss likelihood.
Audit Reports - Pre-Clarity Project
Gain contingencies are not reported.
Audit Reports - Pre-Clarity Project
It doesn’t. Opinion is Unqualifed.
Audit Reports - Pre-Clarity Project
Qualified Opinion is issued.
Similar to Scope Limitation.
Explanatory paragraph after Scope Paragraph.
Opinion refers to GAAP issue.
Audit Reports - Pre-Clarity Project
Adverse opinion is issued.
Same paragraph structure as a Qualified opinion.
Audit Reports - Pre-Clarity Project
Unqualified opinion with an Emphasis is OK
Explanatory paragraph is added after Opinion paragraph.
Audit Reports - Pre-Clarity Project
An audit performed under governmental auditing standards (GAS).
Audit Reports - Pre-Clarity Project
GAS is more strict that GAAS.
Audit Reports - Pre-Clarity Project
A report on internal control is required.
GAAS and GAS don’t require the I/C report.
Audit Reports - Pre-Clarity Project
