Reporting on Audit Engagements Flashcards

1
Q

unmodified audit opinion

A

-no scope limitation that is fairly stated
-auditor believes based on sufficient appropriate evidence, an estimate of the total likely misstatements is less than a material amount
-disputes over significant accounting issues has been settled to the auditor’s satisfaction

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2
Q

qualified audit opinion

A

scope limitation if material and not pervasive OR GAAP departure if material not pervasive

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3
Q

adverse audit opinion

A

GAAP departure that is material and pervasive

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4
Q

disclaimer of opinion

A

scope limitation that is material and pervasive

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5
Q

management acknowledges responsibility for the F/S twice

A

before the audit begins (engagement letter)
and at the end of the audit (in management representation letter)

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6
Q

if management refuses to accept responsibility for the F/S during the engagement stage

A

auditor should not accept engagement

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7
Q

if management refuses to accept responsibility for the F/S at the end of the audit in the representation letter

A

auditor should withdraw or disclaim opinion

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8
Q

emphasis of matter paragraph

A

used to draw attention to a matter properly presented in F/S but is fundamental for a user to fully understand the F/S

exs. F/S prepared using special purpose framework; change in accounting principle that affects consistency significant transactions with related parties

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9
Q

auditor issues unmodified opinion with reference to the disclosure when there is…

A

substantial doubt about the entity’s ability to continue as a going concern

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10
Q

STANDARD UNQUALIFIED AUDIT REPORT ON ISSUERS ICFR

A

opinion on F/S
basis for opinion section (ICFR)
critical audit matters section (CAM)

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11
Q

STANDARD UNQUALIFIED AUDIT REPORT ON ISSUERS ICFR: opinion on F/S

A

-identifies entity
-identifies F/S and dates that were audited
-state auditors opinoin
-identify applicable finanical reporting framework
-states auditor audited I/C

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12
Q

STANDARD UNQUALIFIED AUDIT REPORT ON ISSUERS ICFR: basis for opinion section (ICFR)

A

-states responsibilities of the auditor and management
1. management: I/C is their responsibility; mention their report on I/C
2. auditor: responsible for expressing opinion on I/C
-describes basic elements of PCAOB
1. auditor obtained reasonable assurance
2. is registered with PCAOB
3. is independent
-states audit provided reasonable basis for opinion
-describes audit
1. understanding ICFR
2. assessing RMM exists
3. tests and evaluate the design and operating effectiveness of ICFR
-describes reason for modified opinion if applicable
-title reflects opinion if modified
-states auditor believe evidence is sufficient and appropriate

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13
Q

STANDARD UNQUALIFIED AUDIT REPORT ON ISSUERS ICFR: critical audit matters section (CAM)

A

-describes challenging or subjective issues that relate to material accounts or disclosures and were discussed with audit committee
**required section for qualified or unqualified opinion even if no CAMs identified
**not allowed for adverse or disclaimer of opinion issued
1. identify the CAM
2. describe the main factors that led the auditor to determine the matter was a CAM
3. describe how the CAM was addressed in the audit
4. reference the relevant F/S assertions or disclosures

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14
Q

STANDARD UNQUALIFIED AUDIT REPORT ON ISSUERS F/S: basis for opinion section (F/S)

A

-F/S are responsibility of mgmt
-auditor responsible for expressing opinion
-audit employed PCAOB standards
-PCAOB requires the auditor to plan and perform the audit to obtain reasonable assurance”
“-Audit included:
1. assessing RMM
2. procedures to respond to those risks
3. examining, on a test basis, evidence regarding amounts and disclosures
4. evaluating overall presentation of F/S
-auditor believes that the audit provides a reasonable basis for the opinion

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15
Q

financial statements and ICFR statement

A

have the same date

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15
Q

ISSUER REPORTS DO NOT INCLUDE SECTIONS DEDICATED TO

A

LISTING THE RESPONSIBILITIES OF MANAGEMENT OR THE AUDITOR

16
Q

if management refuses to revise information with material inconsistencies

A

-include other-matter paragraph
-withhold audit report
-withdraw from engagement

17
Q

other matter paragraph

A

used to communicate matters other than those already included in F/S

18
Q

key audit matters (KAM)

A

are issues that were discussed with those charged with governance and were of most significance in the audit

19
Q

KAM not included in

A

adverse opinion or disclaimer of opinion unless required by law because it may overshadow or distract from opinion

20
Q

in a qualified opinion, KAM refers to

A

basis of opinion section NOT describe the issue
causing the modification

21
Q

in an unmodified opinion with going concern section, KAM refers to

A

going concern section NOT describe the going
concern issue

22
Q

basic F/S is omitted, auditor issues

A

qualified opinion

23
Q

change in estimate is

A

not mentioned unless they are so unreasonable as to constitute a material misstatement

24
Q

justified change in principle…unjustified change

A

results in an unmodified opinion with an emphasis of matter paragraph which references disclosure, but does not provide explanation

EOM does not exist: qualified or adverse opinion section

25
Q

NONISSUER’S AUDIT REPORT: DISCLAIMER OF OPINION

A

disclaimer of opinion
basis for disclaimer opinion
responsibilities of mgmt for F/S
auditors responsibilities for the audit of F/S

26
Q

NONISSUER’S AUDIT REPORT: DISCLAIMER OF OPINION: disclaimer of opinion

A

first paragraph
1. identify entity
2. state auditor was engaged to audit the F/S
3. state title of each stmt (including dates)
4. refer to notes to F/S
second paragraph
1. state bc matters disclosed in the basis for
disclaimer of opinion section, no opinion is expressed

27
Q

NONISSUER’S AUDIT REPORT: DISCLAIMER OF OPINION: basis for disclaimer opinion

A

-describes scope limitation and any known
material misstatements

28
Q

NONISSUER’S AUDIT REPORT: DISCLAIMER OF OPINION: responsibilities of mgmt for F/S

A

-not altered

29
Q

NONISSUER’S AUDIT REPORT: DISCLAIMER OF OPINION: auditors responsibilities for the audit of F/S

A

-narrowed to avoid giving impression that a full audit was performed
-performed audit report in accordance with GAAS
-mentions requirement for independence
-unable to obtain sufficient appropriate evidence