PCAOB on Audit Reports

Question 1

Which of the following is least likely to be included in the audit report on the financial statements of a public company?
A statement that the financial statements follow generally accepted accounting principles of the United States.
A title such as “Report of Independent Certified Public Accounting Firm.”
The city in which the report was issued.
The signature or printed name of the CPA firm.

Answer 1

A title such as “Report of Independent Certified Public Accounting Firm.”

This answer is correct because audit reports for public companies should be titled “Report of Independent Registered Public Accounting Firm.”

Question 2

Which of the following circumstances requires modification of the accountant’s report on a review of interim financial information of a publicly held entity?
Inconsistent accounting principle application
Inadequate disclosure
Yes Yes
Yes No
No Yes
No No

Answer 2

No Yes

This answer is correct because inconsistent accounting principle application does not require report modification and inadequate disclosure does.

Question 3

How does an auditor make the following representations when issuing the standard public company auditor’s report on comparative financial statements?
Examination of

evidence on

a test basis
Consistent

application of

accounting principles
Explicitly Explicitly
Implicitly Implicitly
Implicitly Explicitly
Explicitly Implicitly

Answer 3

Explicitly Implicitly

The audit report explicitly states that the examination of evidence is made on a test basis and implicitly assumes consistent application of accounting principles.

Question 4

The PCAOB issued an auditing standard that specified the reporting language to be used in audit reports applicable to issuers relative to the AICPA standards that the PCAOB adopted on an interim basis in April 2003. The PCAOB audit report modifications included all of the following except for
Changed the title of the report from “Independent Auditor’s Report” to “Report of the Independent Registered Public Accounting Firm.”
Changed the date of the auditor’s report to the date that the issuer’s financial statements have been filed with the Securities and Exchange Commission.
Replaced the reference to “auditing standards generally accepted in the United States of America” with reference to “the standards of the Public Company Accounting Oversight Board (United States).”
Added a requirement that registered public accounting firms specify their city and state (or country, as applicable) along with their signature and date of the audit report.

Answer 4

Changed the date of the auditor’s report to the date that the issuer’s financial statements have been filed with the Securities and Exchange Commission.

The PCAOB did not change how the auditor’s report is dated. That date is determined by when the auditor has gathered sufficient appropriate audit evidence as a reasonable basis for the opinion, not by the date of any filings with the SEC. Answers A, C, and D were changes in the auditor’s report as a result of the PCAOB’s auditing standards.