Introduction to Audit Reports

Question 1

What are the five main sections of the unmodified report?

Answer 1

1) No Label: Identifies the nature of the engagement and the entity’s financial statements involved
2) Managements responsibility for the financial statements (responsible for the fair presentation of the financial statements AND the design and implementation of Internal Controls

3) Auditors Responsibility (three paragraphs)
- First: Responsibility to express an opinion, conduct the audit in accordance with (GAAS), plan and perform the audit to provide reasonable assurance

• Second: Perform audit procedures to obtain audit evidence on amounts and disclosures, procedures depend on auditor judgement, making risk assessments which are considered by internal control, auditor express no opinion on internal controls, includes evaluating appropriateness of accounting policies and the reasonableness of significant accounting estimates

Third- Belief that the audit evidence is sufficient and appropriate to provide a basis for an opinion

4) Opinion: Express the opinion
5) Signature block

Question 2

What changes when the auditor’s report includes a section after the opinion paragraph “report on Other Legal and Regulatory requirements, what needs to proceed the introduction paragraph?

Answer 2

REPORT ON THE FINANCIAL STATEMENTS (Basically you need to separate the two distinctively)

Question 3

What is the correct title of the auditors report?

Answer 3

INDEPENDENT AUDITORS REPORT

Question 4

Who do we address the auditors report to?

Answer 4

Usually the board of directors and the shareholders

Question 5

Under the signature block, what needs to be stated?

Answer 5

The city and state of the office primarily responsible for the report

It has to be dated (date of sufficient appropriate evidence)

Question 6

How is your audit report impacted if a portion of the F/S were done by a predecessor auditor?

Answer 6

Include an “Other Matter Paragraph” indicating that the prior year F/S were audited by a predecessor and the date of the predecessor’s audit report and type of opinion that was issued.

Question 7

What happens current year F/S were AUDITED by the prior years were only REVIEWED OR COMPILED?

Answer 7

Auditors should include an “Other Matter Paragraph” indicating the service did not include a basis for opinion.

Question 8

What happens if prior year F/S were not even reviewed or compiled?

Answer 8

The auditor report would include an “Other Matter Paragraph” indicating that the comparative financial statements were not audited!