Overview of Auditor's Report

Question 1

GAAS require the auditor’s report to contain either an expression of opinion regarding the financial statements or an assertion to the effect that an opinion cannot be expressed. The objective of this requirement is to prevent

Misinterpretations regarding the degree of responsibility the auditor is assuming.

An auditor from reporting on one basic financial statement and not the others.

An auditor from expressing different opinions on each of the basic financial statements.

Restrictions on the scope of the examination, whether imposed by the client, or by the inability to obtain evidence.

Answer 1

Misinterpretations regarding the degree of responsibility the auditor is assuming.

The objective of the requirement is to prevent misinterpretations regarding the degree of responsibility the auditor is assuming when his name is associated with financial statements.

Question 2

How does an auditor make the following representations when issuing the standard auditor’s report on comparative financial statements?
Examination of evidence
Consistent application of accounting principles
Explicitly Explicitly
Implicitly Implicitly
Implicitly Explicitly
Explicitly Implicitly

Answer 2

Explicitly Implicitly

The standard auditor’s report on comparative financial statements states explicitly that evidence is obtained (and therefore examined) and implies that accounting principles have been consistently applied. Such application is assumed unless the report indicates otherwise.

Question 3

An auditor’s responsibility to express an opinion on the financial statements is:

Implicitly represented in the auditor’s unmodified report.

Explicitly represented in the responsibility paragraphs of the auditor’s unmodified report.

Explicitly represented in the opening paragraph of the auditor’s unmodified report.

Explicitly represented in the opinion paragraph of the auditor’s unmodified report.

Answer 3

Explicitly represented in the responsibility paragraphs of the auditor’s unmodified report.

GAAS require an auditor to express an opinion on the financial statements. That responsibility is EXPLICITLY represented in the Auditor’s Responsibility paragraphs of the auditor’s unmodified report which states that the auditor’s responsibility is to express an opinion.

Question 4

The auditor makes explicit reference to “auditing standards generally accepted in the United States of America” in which paragraph of the standard unmodified audit report?

Opening.
Auditor’s Responsibility.
Opinion.
Both second and third option.

Answer 4

Auditor’s Responsibility.

The second sentence of the Auditor’s Responsibility section states as follows: “We conducted our audits in accordance with auditing standards generally accepted in the United States of America.”