Ch 16: Reporting on the audit

Question 1

what is the positive opinion for a private company

Answer 1

unmodified

Question 2

what is a positive opinion for a public company

Answer 2

unqualified

Question 3

what are the main sections of an unqualified report

Answer 3

1. opinion on the financial statements
2. basis for opinion
3. critical audit matter (cam)

Question 4

how many CAMs are there generally

Answer 4

at least 1

Question 5

what are the subsections for the CAMs (hint there are 2)

Answer 5

1. description of the matter
2. how the CAM was addressed (substantive procedures)

Question 6

what are the main points in the “opinion on the financial statements” section of an unqualified audit report

Answer 6

• 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

Question 7

what are the main points in the “basis for opinion” section of an unqualified audit report

Answer 7

• 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

Question 8

what are the main points in the “Critical audit matter” section of an unqualified audit report

Answer 8

• CAM was communicated to audit committee
• describes what a CAM is

Question 9

what is at the very end of a public audit report

Answer 9

• 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

Question 10

what are the different modified opinions?

Answer 10

-adverse
- qualified
- disclaimer of opinion

Question 11

what are 4 instances in unqualified/ unmodified opinion that would require an explanation or modification

Answer 11

1. consistency
2. going concern
3. emphasis of a matter
4. opinion basis in part on other auditors

Question 12

the Emphasis of a matter or Going Concern Section go where in the the auditor’s report

Answer 12

after basis for opinion section

Question 13

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

Answer 13

add verbiage in the opinion section

Question 14

if a material event occurs after the end of field work but prior to report release date what are the audit report dating options

Answer 14

dual dating and sate of subsequent event

Question 15

what is dual dating

Answer 15

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

Question 16

if a material subsequent event occurs after the release of the audit report it may require

Answer 16

the reissue of the audit report with the revised FS

Question 17

how can you date a reissued audit report

Answer 17

• dual dating (end of fieldwork date and date of subsequent event)
• new end of fieldwork date (date of subsequent event)

Question 18

if a reissued report ( reissued due to material subsequent event after issued report) is different from the original opinion what do auditors do

Answer 18

-add emphasis of matter paragraph after basis of opinion
- include date/ opinion of previous report and why updated report is different

Question 19

what is an integrated audit

Answer 19

an audit that combines the financial statement audit with an audit of the effectiveness of ICFR

Question 20

who is required to have an integrated audit

Answer 20

public companies

Question 21

what are the possible opinion for an integrated audit

Answer 21

• standard unqualified opinion
• adverse opinion
• disclaimer

Question 22

what is a standard unqualified opinion for an integrated audit claiming

Answer 22

auditors found no material weaknesses in internal control

Question 23

what is an adverse opinion in an integrated audit claiming

Answer 23

the company did not maintain effective control over financial reporting (material weaknesses)

Question 24

what does a disclaimer of opinion in an integrated audit mean

Answer 24

no opinion was given- usually a severe scope limitation

Question 25

what are the main sections of an unmodified report

Answer 25

1. opinion
2. basis for opinion
3. responsibilities of management for the financial statements
4. auditor’s responsibilities for the audit of the financial statements

Question 26

what must be included in the title of a an unmodifed opinion

Answer 26

“independent”

Question 27

what must be included in the title of an unqualified opinion

Answer 27

“independent” and “registered”

Question 28

who is an unqualified opinion addressed to

Answer 28

BOD and shareholders of the company

Question 29

who is an unmodified opinion addressed to

Answer 29

addressed as required by the terms of the engagement

Question 30

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

Answer 30

these are examples of change in accounting principle

Question 31

what is the main difference between the descriptions of the audit in an unmodified and an unqualified opinion

Answer 31

in an unqualified opinion the auditors express an opinion on the effectiveness of internal controls but no opinion expressed on IC in unmodified

Question 32

what is a situation that would require a component auditor

Answer 32

if the client is a parent company with one or more subsidiaries

Question 33

is the name of a component auditor included in an audit report

Answer 33

not usually but nothing against it

Question 34

what situation would cause the auditor to issue an adverse opinion of the effectiveness of ICFR

Answer 34

auditor would issue adverse opinion if one or more material weaknesses exist

Question 35

should it be discussed how ICFR was conducted in a disclaimer of opinion

Answer 35

no- should clearly state there’s no opinion