Ch 16: Reporting on the audit Flashcards
what is the positive opinion for a private company
unmodified
what is a positive opinion for a public company
unqualified
what are the main sections of an unqualified report
- opinion on the financial statements
- basis for opinion
- critical audit matter (cam)
how many CAMs are there generally
at least 1
what are the subsections for the CAMs (hint there are 2)
- description of the matter
- how the CAM was addressed (substantive procedures)
what are the main points in the “opinion on the financial statements” section of an unqualified audit report
- auditors state they have audited the FS
- auditors state their opinion ( in our opinion the FS are presented fairly in all material respects)
- conform with GAAP
what are the main points in the “basis for opinion” section of an unqualified audit report
- FS are responsibility of management
- auditor responsibility is to express opinion
- firm is registered (with PCAOB)
- auditors are independent
- obtained reasonable assurance and assessed RMM
what are the main points in the “Critical audit matter” section of an unqualified audit report
- CAM was communicated to audit committee
- describes what a CAM is
what is at the very end of a public audit report
- name of firm who did the audit
- how long that firm has been the client’s auditor (tenure statement)
- where the firm is based out of
- the end of fieldwork date
what are the different modified opinions?
-adverse
- qualified
- disclaimer of opinion
what are 4 instances in unqualified/ unmodified opinion that would require an explanation or modification
- consistency
- going concern
- emphasis of a matter
- opinion basis in part on other auditors
the Emphasis of a matter or Going Concern Section go where in the the auditor’s report
after basis for opinion section
if there is an opinion based in part on other auditors (in the case of a consolidated statement or such) what to you do in the audit report
add verbiage in the opinion section
if a material event occurs after the end of field work but prior to report release date what are the audit report dating options
dual dating and sate of subsequent event
what is dual dating
putting two dates at the end of the audit report
1. is the date of the end of fieldwork
2. the date of the subsequent event
if a material subsequent event occurs after the release of the audit report it may require
the reissue of the audit report with the revised FS
how can you date a reissued audit report
- dual dating (end of fieldwork date and date of subsequent event)
- new end of fieldwork date (date of subsequent event)
if a reissued report ( reissued due to material subsequent event after issued report) is different from the original opinion what do auditors do
-add emphasis of matter paragraph after basis of opinion
- include date/ opinion of previous report and why updated report is different
what is an integrated audit
an audit that combines the financial statement audit with an audit of the effectiveness of ICFR
who is required to have an integrated audit
public companies
what are the possible opinion for an integrated audit
- standard unqualified opinion
- adverse opinion
- disclaimer
what is a standard unqualified opinion for an integrated audit claiming
auditors found no material weaknesses in internal control
what is an adverse opinion in an integrated audit claiming
the company did not maintain effective control over financial reporting (material weaknesses)
what does a disclaimer of opinion in an integrated audit mean
no opinion was given- usually a severe scope limitation
what are the main sections of an unmodified report
- opinion
- basis for opinion
- responsibilities of management for the financial statements
- auditor’s responsibilities for the audit of the financial statements
what must be included in the title of a an unmodifed opinion
“independent”
what must be included in the title of an unqualified opinion
“independent” and “registered”
who is an unqualified opinion addressed to
BOD and shareholders of the company
who is an unmodified opinion addressed to
addressed as required by the terms of the engagement
the following are examples of what:
- a change in inventory valuation (such as changing from LIFO to FIFO)
- a change in revenue recognition like switching from % of completion method to completed contract method
these are examples of change in accounting principle
what is the main difference between the descriptions of the audit in an unmodified and an unqualified opinion
in an unqualified opinion the auditors express an opinion on the effectiveness of internal controls but no opinion expressed on IC in unmodified
what is a situation that would require a component auditor
if the client is a parent company with one or more subsidiaries
is the name of a component auditor included in an audit report
not usually but nothing against it
what situation would cause the auditor to issue an adverse opinion of the effectiveness of ICFR
auditor would issue adverse opinion if one or more material weaknesses exist
should it be discussed how ICFR was conducted in a disclaimer of opinion
no- should clearly state there’s no opinion
