Chapter 1 Flashcards
Disclaimer of Opinion due to the lack of sufficient audit evidence, what should the auditor do?
When a disclaimer of opinion is issued due to a lack of sufficient audit evidence, the lack of evidence should be disclosed in the Auditor’s Responsibility paragraph and discussed in an additional paragraph before the opinion paragraph. This paragraph should be titled Basis for Disclaimer of Opinion.
Who prepares the notes in the financial statements?
ONLY MANAGEMENT. NOT THE AUDITOR.
When to issue a Qualified Opinion
Presentation- the financial statements are misstated (GAAP DEPARTURE)
Scope- the auditor was not able to get sufficient appropriate audit evidence
What does the auditor have to do if there is a change in accounting principle? (Change was accounted for properly)
Write it in an emphasis-of-matter paragraph AFTER the opinion paragraph.
What is the Qualified Opinion “really” saying about the financial statements?
what it means is that the auditor is expressing reservations about the financial statements but that they are still fairly stated. (the scope limitation or misstatment is not pervasive (effecting multiple areas of financial statements)
When to give an adverse opinion ? (THERE IS ONLY ONE REASON)
When the financial mis-statements are BOTH material and pervasive.
That means that there are misstatements that affect more areas of thee financial statements and the financial statements are misleading because they are not fairly stated
When to issue a disclaimer of opinion?
This happens when the auditor is unable to obtain sufficient appropriate audit evidence and the effects could be BOTH material and pervasive.
If there is a GAAP issue, the auditor will issue a _______ opinion or a _______ opinion.
Qualified or Adverse
Dual Dating is used when?
Dual dating is used when there is a subsequent event occurring after the original date of the auditor’s report, and the auditor wishes to extend responsibility only for the one event. It is not used for comparative financial statements
Auditor’s responsibility for subsequent events…
The auditor does have an active responsibility to make continuing inquiries between the date of the financial statements and the date of the auditor’s report.
The auditor’s active responsibility stops on the date of the auditor’s report.
The auditor does have an active responsibility to make continuing inquiries between the date of the financial statements and the date on which sufficient appropriate audit evidence has been obtained.
when is Consistency implicitly or explicity mentioned in the auditors report?
Consistency is implicitly mentioned in the auditors report unless.. mentioned in an emphasis-of-a-matter paragraph only if there are issues with consistency
Auditor of a non-issuer must conduct the audit in accordance with _________ standards
An auditor of a nonissuer must conduct the audit in accordance with ASB standards.
While an auditor is only required to conduct the audit in accordance with ASB standards, the auditor may choose to follow PCAOB standards as well.
A quality control system consists of __________.
policies and procedures designed, implemented, and maintained to ensure that the firm complies with professional standards and appropriate legal and regulatory requirements, and that any reports issued are appropriate in the circumstances.
True or False
Under U.S. auditing standards, the auditor’s audit report includes a statement that “An audit includes evaluating…significant estimates made by management…”
TRUE
For additional Supplementary information required by the FASB, the auditor should
apply certain limited procedures to the information and add an other-matter paragraph to the financial statement audit report.