CHAPTER 15 Flashcards
REPORTS Opinions and Disclaimers
If an issuer releases financial statements that purport to present its financial position and results of operations, but omits the statement of cash flows, the auditor will ordinarily express a(n)
Qualified Opinion.
An entity the reports financial position and results of operations should provide a statement of cashflow.
Therefore the omission of the cashflow statement is normally the basis for modifying the opinion.
What does an auditors report on audited financial statement do?
Describes the general nature of an audit. It does not directly refer to sampling or describe specific procedures.
For a particular entity’s financial statements to be presented fairly, it is not required that
Accounting policies be applied on a basis consistent with those followed in the prior year.
The financial statements of a non issuer include a separate statement of changes in equity. This statement should
Be identified in the introductory paragraph of the report, but need not be reported on separately in the opinion paragraph.
When financial statements audited by the independent auditor contain notes that are captioned “unaudited” or “not covered by the auditor’s report,” the auditor
May refer to those notes in the auditors report.
When an auditor is retained to audit the financial statements of an entity that is not his or her client, who would the report be addressed to?
According to the AICPA the report would be addressed to the client, and not the
If a CPA concludes that the unaudited Financial Statements of an issuer on which the CPA is disclaiming an opinion are NOT in conformity with GAAP because management failed to capitalize leases. The CPA suggests appropriate revisions to the financial statements, but management refuses to accept the CPA’s suggestions.
What would the CPA ordinarily do under these circumstances?
Describe the nature in the departure from GAAP in the CPA’s report, and state the effect on the financial statements, if practicable.
An accountant planning to disclaim an opinion under the PCAOB standards should?
An accountant planning to disclaim an opinion may discover a material misstatement from GAAP.
Under the PCAOB standards, the accountant should disclose the departure in the disclaimer, including its effects if they have been determined by management or by the accountants procedures.
should the phrase “subject to” be expressed in a qualified opinion?
The phrase “subject to” should not be used in any report. It is not clear or forceful enough.
When is a CPA considered not associated with unaudited financial statements of a public entity?
Under PCAOB standards,
a CPA is associated with unaudited financial statements when:
1. he/she prepares or assist in preparing them, or
2. consents to the use of his/her name with them.
If neither of these actions occurred, the CPA is not associated with the unaudited statements.
