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Audit > Chapter 15 -- Reporting > Flashcards

Chapter 15 -- Reporting Flashcards

1
Q

Section 15.1: The Auditor’s Reporting Responsibility

What is included in the Opinion Section of the Auditor’s Report?

A

The financial statements that are being audited:
* Balance Sheet
* Statement of Income
* Statement of Equity
* Statement of Cash Flows

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2
Q

Section 15.2: The Auditor’s Report

What is included in the Opinion section of an auditor’s report?

A
  • The first paragraph identifies the titles of the financial statements.
  • Identifies the applicable financial reporting framework and its origin (i.e. GAAP, OCBOA).
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3
Q

Section 15.2: The Auditor’s Report

What are the components of the auditor’s report?

A
  • Opinion
  • Basis for Opinion
  • Responsibilities of Management for the Financial Statements
  • Auditor’s Responsibilities for the Audit of the Financial Statements
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4
Q

Section 15.2: The Auditor’s Report

What statement is included in the Auditor’s Responsibilities for the Audit of the Financial Statements?

A

“. . . we exercise professional judgment and maintain professional skepticism throughout the audit.”

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5
Q

Section 15.2: The Auditor’s Report

When can an unqualified opinion be issued when only statistical sampling is used?

A
  • The auditor must become satisifed that the procedures are reliable.
  • The auditor must observe come counts and be satisifed that the sampling plan is reasonable and statiscally valid.
  • The sampling plan has been properly applied.
  • The results are reasonable
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6
Q

Section 15.2: The Auditor’s Report

What is a critical audit matter (CAM)?

A

A critical audit matter (CAM) is any matter resulting from the audit of the financial statements that:
* Is either communicated, or must be communicated to the audit committee.
* Relates to material accounts and disclosures (i.e. possible material loss).
* Involves challenging, subject or complex auditor judgement.

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7
Q

Section 15.3: Addressing and Dating the Report

What is report date is used when the auditor reissues a previous report for comparative purposes only and no changes were made?

A

The original date of the report is used.

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8
Q

Section 15.3: Addressing and Dating the Report

When is dual dating used on the auditor’s report?

A
  • Dual dating is used when a subsequent event disclosed in the financial statements occurs after the date of the auditor’s report but before the release of the auditor’s report.
  • The auditor would use dual dating when they revise the wording of the report to assume responsibility for a specific subsequent event.
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9
Q

Section 15.3: Addressing and Dating the Report

When is the earliest an audit report can be dated?

A

The date of the auditor’s report is based on when the auditor has obtained sufficient audit evidence to support an opinion.

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10
Q

Section 15.4: Qualified Opinions

What causes a Qualified Opinion?

A

A qualified opinion is issued when:

  • There is a material misstatement related to specific amounts in the financial statement that is not pervasive.
  • Circumstances not controlled by the entity
  • Circumstances related to the nature or timing of work due to the late engagement.
  • Limitations imposed by management.
  • Unjustifed change in accounting principle
  • Scope limitation
  • Omitting a financial statement from the audit (i.e. Statement of Cash Flow).
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11
Q

Section 15.4: Qualified Opinions

What is included in a Qualified Opinion?

A

The qualified opinion report should include:

  • A description of the financial effects
  • An explanation on how the disclosures are misstated. Or
  • Omitted information.
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12
Q

Section 15.4: Qualified Opinions

What situation would cause an auditor to issue either a qualified or adverse opinion?

A

There is substantial doubt about the entity’s ability to continue as a going concern that is not adequately disclosed in the notes of the financial statements.

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13
Q

Section 15.4: Qualified Opinions

What type of opinion is expressed when the financial statements are materially, but not pervasively, misstated?

A

Qualified opinion

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14
Q

Section 15.4: Qualified Opinions

What would cause either a qualified or disclaimer to be issued?

A
  • The auditor is unable to obtain sufficient appropriate evidence that would confirm that the financial statements, as a whole, are free from material misstatement.
  • A refusal from the client’s attorney to provide a letter of inquiry would cause a qualified or disclaimer to be issued.
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15
Q

Section 15.5: Adverse Opinions

What type of opinion is expressed when the financial statements are materially and pervasively misstated?

A

Adverse opinion

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16
Q

Section 15.5: Adverse Opinions

What are the causes of an adverse opinion?

A

Sufficient evidence is obtained to conclude the that financial statements are materially misstated and pervasive.

17
Q

Section 15.6: Disclaimers of Opinion

What type of opinion is expressed if the client refuses the suggestions of an auditor in regard to disclosure of the financial statements?

A
  • An adverse opinion will be issued if the financial statements lack adequate disclosure, and the client refuses to the auditor’s suggestions to correct the issue.
  • The disclaimer of opinion should include a description of the departure, which should state the nature of the departure and the effects on the financial statements, as well as any other necessary information.
18
Q

Section 15.6: Disclaimers of Opinion

What causes a disclaimer of opinion?

A
  • The auditor cannot obtain sufficient appropriate evidence, which results in the financial statements being materially misstated and pervasive.
  • A scope limitation that results from circumstances not controlled by the entity.
  • A scope limitation because of circumstances related to the nature of timing of the work (i.e. unable to confirm beginning inventory).
  • A scope limitation due to limits imposed by management
  • The auditor is unable to determine information due to an employee fraud scheme

Audit (23 decks)

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