D describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls;

Question 1

What’s an audit report (financial and supporting records are audited)

Answer 1

An independent report which reasonably assures that financial statements are ‘fairly presented’ - no material error, fraud, or illegal act

Unqualified- reasonable,accurate(internal controls), fair

Question 2

Objective of auditing the Financial Statement

Answer 2

To provide an opinion on the fairness (free from material error, fraud, illegal acts) and reliability of the financial statements

Question 3

What does an auditor exactly examine?

Answer 3

The company’s internal control systems, assets and liabilities, any material errors in financial statements

Question 4

What three parts compose a standard auditors opinion?

Answer 4

independent review

Followed GAAP (principles chosen and estimates made are reasonable=reasonable assurance = no material errors, fraud, illegal acts

Question 5

Auditor opinions (unqualified>qualified>adverse>disclaimer)

Answer 5

Unqualified (clean)

Qualified = If Fin.Stmts make exceptions to GAAP

Adverse = FinStmts = not presented fairly = doesn’t conform to GAAP

Disclaimer= unable to express

Question 6

Describe the importance of effective internal controls (internal control opinion required by GAAP)

Answer 6

Internal controls = managements responsibility for accurate and fair financial statement presentation.

Question 7

What’s unique about an auditors internal controls opinion?

Answer 7

separate to auditors report, Auditors internal controls opinion = ‘fourth’ element of standard opinion.

Question 8

What are the responsibilities of an auditor for a publicly traded firm in the US?

Answer 8

Express an opinion about the effectiveness of the company’s internal control systems under Sarbanes-Oxley included as a final paragraph in auditors report or as a seperate opinion