Report, letters: Key words

Question 1

Auditor’s report: How many sections are there? What is each section?

Answer 1

5. No label.
6. Management responsibility for the F/S.
7. Auditor’s responsibility.
8. Opinion.

Question 2

Auditor’s report: How many sentences in the 1st section? What is included? Starts with what?

Answer 2

1 sentence.
Nature of the engagement, the entity’s financial stmt involved, date range.
“Wa have audited…”

Question 3

Auditor’s report: How many sentences in the 2nd section (management responsibility)? What are 2 key points? What is in the body?

Answer 3

1 sentence.
Responsibility for F/S and I/C.
Management is responsible for the preparation and fair presentation of F/S in accordance with accounting principles generally accepted in US.
Includes design, implementation, and maintenance of I/C relevant to the preparation and fair presentation of F/S that are free from material misstatement, whether due to fraud or error.

Question 4

Auditor’s report: How many sentences in the 3rd section (auditor’s responsibility), 1st paragraph? What is included?

Answer 4

3 sentences.

1. Responsibility to express an opinion based on our audits (plural).
2. Conducted the audits in accordance with GAAS.
3. Plan and perform the audit to provide reasonable assurance that F/S are free from material misstatements.

Question 5

Auditor’s report: How many sentences in the 3rd section (auditor’s responsibility), 2nd paragraph? What is included?

Answer 5

5 sentences.

1. Perform proceduresto 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 to design audit procedures that are appropriate in the circumstances.
4. Express no such opinion (about effectiveness of I/C).
5. An audit includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates.

Question 6

Auditor’s report: How many sentences in the 3rd section (auditor’s responsibility), 3rd paragraph? What is included?

Answer 6

1.
expressing the auditor’s belief that the audit evidence is sufficient and appropriate to provide a basis for the opinion.

Question 7

Auditor’s report: What’s included in the 4th section?

Answer 7

In our opinion, F/S present fairly, in all material respects, the financial position of ABC Company and its subsidiaries as of December 31, 20X1 and 20X0, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Question 8

Auditor’s report: Emphasis-of-matter 4 key points?

Answer 8

1. F/S prepared assuming the company will continue as a going concern.
2. Substantial doubt exists about the ability to continue as a going concern.
3. F/S don’t include any adjustments that might result from the outcome of this uncertainty.
4. Opinion not modified.

Question 9

Engagement letter: what are 7 factors addressed?

Answer 9

1. The objective and scope of the audit
2. The auditor’s responsibilities;
3. Management’s responsibilities;
4. A statement about the inherent limitations of an audit;
5. A statement identifying the applicable financial reporting framework;
6. Reference to the expected content of any reports to be issued; and
7. Other matters as warranted in the auditor’s judgment.

Question 10

Engagement letter: Key words for objective/scope?

Answer 10

For the purpose of expressing an opinion.

will provide you with the audit report.

Question 11

Engagement letter: Key words for auditor’s responsibilities?

Answer 11

• Express an opinion - limited to the period covered by the audit.
• If can’t express unqualified opinion, will discuss in advance.
• If can’t complete the audit/form an opinion, may decline to express an opinion or issue a report.
• For conducting the audit in accordance with GGAP.
• Obtain reasonable, not absolute, assurance F/S free from error, fraud, illegal results direct material effects.
• A material misstatement may not be detected.
• Audit not design to detect errors, fraud, illegal results in immaterial effect.
• Inform all matters of fraud/illegal acts known.
• Obtain an understanding of I/C.
• Not design to provide assurance about I/C, but will report any deficiencies identified.
• will examine on a test basis, assess, evaluate…

Question 12

Engagement letter: Key words for managment’s responsibilities?

Answer 12

• F/S responsibility of management - record, I/C to permit preparation of F/S accordance w/GAAP.
• Correct material misstatement.
• Provide representation letter to affirm uncorrected misstatements are immaterial.
• compliance w/laws/regulations.
• Making all info available to the auditor in a timely manner.

Question 13

Management representation letter: What are 8 contents re: F/S?

Answer 13

That management is responsible for;

1. the fairness of F/S.
2. I/C over financial reporting.
3. I/C to prevent/detect fraud.
4. sig assumptions for estimates are reasonable.
   5 and 6. related party transactions and subsequent events properly accounted/disclosed.
5. uncorrected misstatement immaterial.
6. effects of litigation/claims accounted properly and disclosed.

Question 14

Management representation letter: What does it state about info provided to the auditor?

Answer 14

The auditor was provided access to all information…
additional info requested…
access to persons….
all transactions have been recorded….
provided the risk assessment re: fraud…
no knowledge of fraud w/management, I/C roles, other.
no knowledge of allegations or suspected fraud..
disclosed known instances of noncompliance…
disclosed litigation, claims, assessments…
disclosed know related party relationships/transactions..

Question 15

Auditor’s report: what is the structure?

Answer 15

1. Title: Independent auditor’s report.
2. Address: board of directors, shareholders…
3. Body (12 sentences): introductory sentence, management responsibility, auditor’s responsibility, opinion.
4. Signature (name of the firm).
5. City and State.
6. Date.

Question 16

Auditor’s report: why is the word “audits” plural? What if prior F/S was audited by someone else? If it wasn’t audited, reviewed, or complied?

Answer 16

Because it includes comparative F/S.
Explain in “Other matters” section - type of opinion, date.
Explain in other matters section.

Question 17

Auditor’s report: where is “other matter” section?

Answer 17

Right after the opinion of “emphasis of matter” if any.

Question 18

Summary FS: Introductory paragraph: key words?

Answer 18

….are derived from the audited FS….we expressed unmodified opinion on those audited FS…
Summary FS don’t contain all the disclosures required…reading the summary FS is not a substituted for reading the audited FS…

Question 19

Summary FS: Management responsibility paragraph: key words?

Answer 19

Management is responsible for the preparation of the summary FS on the basis described in Not X (ex).

Question 20

Summary FS: Auditor’s responsibility paragraph: key words?

Answer 20

…to express an opinion about whether the summary FS are consistent, in all material respects, with the audited FS based on our procedures, which were conducted in accordance w/ auditing stds generally accepted in US of America…we did not perform any audit procedures regarding the audited FS after the date of our report…

Question 21

AICPA integrated audit: Reporting: if combined, what’s the structure?

Answer 21

1. Management’s report on ICFR.
2. Report on ICFR - nature, timing, also audited ICFR.
3. Management responsibility.
4. Auditor’s responsibility.
5. Definition and inherent limitations of ICFR.
6. Opinions.

Question 22

AICPA integrated audit: Reporting: if separate and unmodified, what’s the structure?

Answer 22

1. Title: Unmodified Opinion on ICFR.
2. Report on ICFR - nature, timing, also audited ICFR.
3. Management responsibility.
4. Auditor’s responsibility.
5. Definition and inherent limitations of ICFR.
6. Opinion.
7. Report on FS.
8. Report on other legal and regulatory requirements.

Question 23

AICPA integrated audit: Reporting: if separate and adverse, what’s the structure?

Answer 23

1. Title: Adverse Opinion on ICFR.
2. Report on ICFR - nature, timing, also audited ICFR.
3. Management responsibility.
4. Auditor’s responsibility.
5. Definition and inherent limitations of ICFR.
6. Basis for Adverse Opinion.
7. Adverse opinion.
8. Report on FS.
9. Report on other legal and regulatory requirements.

Question 24

PCAOB: integrated audit: combined report structure?

Answer 24

1. Introductory paragraph.
2. Scope paragraph.
3. Definition paragraph - ICFR.
4. Inherent limitation paragraph.
5. Opinion paragraph.

Question 25

PCAOB: integrated audit: reporting: where is the management responsibility over ICFR mentioned?

Answer 25

In introductory paragraph.

Question 26

PCAOB: integrated audit: reporting: what’s included in scope paragraph.

Answer 26

…in accordance with the stds of PCAOB (United States).
….we plan and perform the audit to obtain reasonable assurance about whether effective ICFR was maintained in all material respect.
Our audit…included obtaining an understanding of ICFR, assessing the risk…testing and evaluating he design and operating effectiveness of IC based on the assessed risk.
…We believe that our audit provides a reasonable basis for our opinion.

Question 27

Limited-Scope Audit (ERISA): structures?

Answer 27

1. Title: Independent Auditor’s report.
2. Report on FS.
3. Management Responsibility for FS.
4. Auditor’s responsibility.
5. Basis for Disclaimer of Opinion.
6. Disclaimer of Opinion.
7. Other Matter - disclaimer for other schedules.
8. Report on Form and Content in Compliance with DOL Rules and Regulations

Question 28

Limited-Scope Audit (ERISA): what’s included in the auditor’s responsibility?

Answer 28

Our responsibility is to express an opinion….in accordance with stds GAAP in USA. Because of matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Question 29

Limited-Scope Audit (ERISA): what’s included in the Basis for Disclaimer of Opinion?

Answer 29

As permitted…DOL rules and regulations for Reporting and Disclosure under ERISA, the plan administrator instructed us not to perform, and we did not perform..except for comparing… We have been informed by the plan administrator that the trustee holds the… The plan administrator has obtained a certificate from…

Question 30

Limited-Scope Audit (ERISA): what’s included in theReport on Form and Content in Compliance with DOL Rules and Regulations?

Answer 30

The form and content of the information…, other than that derived from the information certified by the trustee [or custodian], have been audited by us in accordance with auditing standards generally accepted in the United States of America and, in our opinion, are presented in compliance with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.