Chapter 7 Flashcards
What are the basic elements of an audit report on financial statements?
Transmittal Letter Title/Cover Page – must include the word “independent” Auditor’s Report: (“FROGLEAPER”) – Brown book includes more Introductory Paragraph The Financial statements (FS) identified in the report were audited The FS are the Responsibility of management. The auditor’s responsibility is limited to expressing an Opinion on the FS.
Scope Paragraph The audit was conducted in accordance with GAAS. Those standards require the auditor to obtain/Look for reasonable assurance that the FS are free from material misstatements. The auditor Examines evidence on a test basis Assess accounting principles and significant estimates made The procedures applied Provide a reasonable basis for an opinion Opinion Paragraph Express an Opinion Reference to GAAP Signature Date of the Auditor’s Report Financial Statements Notes to the Financial Statements Required Supplementary Information (RSI) and Supplemental Information (SI) Management’s Discussion and Analysis (MD&A) Other Considerations Report on Internal Control Over Financial Reporting Findings Views of Responsible Officials
What are the different types of opinions in an audit report?
Unqualified opinion – The F/S are fairly presented in all material respects in conformity with GAAP
Qualified opinion – Except for the effects of matters to which the qualification relates, the F/S are fairly presented. Scope limitations, departures from GAAP, and a lack of consistency may result in a qualified opinion. When the auditor expresses a qualified opinion, the reasons are described in one or more explanatory paragraphs that precede the opinion paragraph.
Adverse Opinion – the F/S, taken as a whole do not present fairly the financial position in accordance with GAAP.
Disclaimer of Opinion – the auditor does not express an opinion on the FS. May result when the audit scope is significantly limited or uncertainties exist concerning a material issue that the affects the FS.
What circumstances may result in the auditor expressing a qualified opinion?
- Scope limitation
- Departures from GAAP
- Lack of consistency
