IV. Forming Conclusions and Reporting Flashcards
What sort of matters are included in a key audit matters (KAM) section?
These are matters determined to be of significance in an audit of a nonissuer. These are matters that have been discussed with those charged with governance
And determined to be most significant in the audit.
A KAM is never included a qualified or disclaimer of opinion reports, only in a unqualified report
What are “critical audit matters”?
Critical audit matters section is only included in issuer audit reports. KAM (key audit matters) are only issued in nonissuer audit reports that are unqualified.
In an examination engagement, when would a practitioner issue an adverse opinion vs. a qualified opinion?
A qualified opinion would be issued when the misstatement is material but not pervasive.
An adverse opinion would be issued when the assumptions from management do not provide a reasonable basis for the F/S.
What is an examination engagement?
An examination is an attest engagement in which a practitioner provides reasonable assurance about whether a subject matter is free from material misstatements. This sort of engagement can be for forecasts or for projections of financial statements
What sort of opinion will be issued in an integrated audit of an issuer when there is a single material weakness?
Adverse. If there is a material weakness, the auditor is required to issue an adverse opinion because the entity does not maintain effective internal control over financial reporting (ICFR)
In a SSARs engagement, does a practitioner do any procedures re: going concern?
Yes, an accountant should make inquiries to determine if there is substantial doubt about the going-concern assumption.
In an engagement letter for a preparation engagement, will there be any note about expected departures from the financial reporting framework?
Yes. The accountant and the client must agree on the departures from the reporting framework in a preparation engagement.
When should a practitioner disclaim an opinion?
Where there is a scope limitation imposed by management (withdrawal is an option for a scope limitation), and when the management is unwilling to sign a management rep letter
What needs to be completed when including a critical audit matter (CAM)?
Auditors must identify the CAM, describe the main factors that led the auditor to determine the matter was a CAM, how the CAM was addressed in the audit, and reference relevant assertions or disclosures.
What is included in the opinion section of an unmodified opinion for a nonissuer?
1st para: Identify entity, state the F/S have been audited, state the title of each statement including dates, refer to notes to the F/S
2nd para: state auditor’s opinion “present fairly in all material respects in accordance with GAAP (or other reporting framework)
If there is no justification for a change in accounting principles, is a disclaimer opinion appropriate?
Failure to provide justification for a change in accounting principle is a GAAP violation, not a scope limitation. If the effects are material but not pervasive, a qualified opinion is appropriate, else an adverse opinion is appropriate if the effects are pervasive.
