Intro to Audit Reports

Question 1

Unqualified Opinion (unmodified opinion)

Answer 1

only requires to have fair representation with GAAP hence there should be no material misstatement and be less than the material amount

• should be presented if their is a remote chance of loss
• should be presented when there is a departure from GAAP due to unusual circumstance but must also write a separate paragraph
• material weaknesses
• allowed to use more than one cost accounting method

Question 2

What are the requirements for an unaudited f/s in comparison with an audited f/s?

Answer 2

the unaudited f/s should be differentiated and should include a reissued report from the prior years f/s or a separate paragraph that indicates the responsibility that needs to be performed from the prior years f/s

Question 3

The accounting principles utilized in the preparation of the financial statements should:

Answer 3

1) be prepared in according to framework
2) be appropriate
3) provide info that may affect the use, understanding, and interpretation of the financial statements;
4) summarize info in a reasonable manner
5) reflect transactions that presents the financial position, results of operations, and cash flows stated within a range of reasonable and practicable limits.

Question 4

GCDO

Answer 4

GAAP-applies to framework
Consistency-from prior year
Disclosure- have to determine if they are adequate
Opinion- based on character and responsibility

Question 5

Structure of an unqualified report

Answer 5

title- "Independent Auditor Report"
address (to whom?)
body of report (6 paragraphs)
-intro sentence-nature of f/s involved (1)
-management responsibility (1)
-auditor responsibility (3)- 
-opinion (1)
signature (firms name, city, state, date)

Question 6

If there was a predecessor that audited the report the prior year then what must the auditor do?

Answer 6

state that in an “Other Matter” paragraph with date, type of opinion

Question 7

what if prior year was not audited?

Answer 7

include “other matter” paragraph stating that and date, statement that the service did not provide a basis for the opinion, reason for any modifications
state if it is review/compiled

Question 8

Auditors Responsibility-first paragraph (3)

Answer 8

The first consists of 3 sentences — opinion, standards, reasonable assurance

(1) responsibility to express an opinion;
(2) conducted the audit in accordance with (GAAS); and
(3) plan and perform the audit to provide reasonable assurance.

Question 9

Auditors Responsibility-second paragraph (5)(

Answer 9

The second consists of 5 sentences — evidence, mm, internal control, no such opinion, and appropriateness/reasonableness of AE

(1) perform procedures to obtain audit evidence about the amounts and disclosures;
(2) the procedures depend on the auditor’s judgment, including assessment of risks of material misstatement, whether due to fraud or error;
(3) in making those risk assessments, the auditor considers internal control;
(4) auditor expresses no such opinion (on internal control, when not engaged to report on internal control in an integrated audit); and
(5) an audit includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates.

Question 10

Auditors responsibility-third paragraph (1)

Answer 10

The third consists of 1 sentence — expressing the auditor’s belief that the audit evidence is sufficient and appropriate to provide a basis for the opinion.