Reporting with Diff. Opinions and Other Auditors A1 M8

Question 1

How does the Sucessor Auditor report when the Predecessor Auditor’s Report is not presented?

Answer 1

1. The Financial Statements from the prior period were audited by another auditor; The predecessor auditors should not be named unless the practice of the predecessors was acquired by or merged with that of the successor.
2. The date of the predecessor auditor’s report.
3. The type of opinion expressed by the predecessor auditor and, if the opinion was modified add a other-matter-paragraph to list the reason for the modification.
4. Add a Other Matter Paragraph to describe why a emphasis-of-matter, other-matter, or explanatory paragraph was included in the predecessor auditor’s report.
5. No assurance is provided regarding the fair presentation of the prior year’s financial statements.
6. The predecessor auditor should obtain a letter of representation from the successor auditor, if the previous report is to be reissued).
7. Different opinions may be issued for the different years presented.

Question 2

What should the predecessor do before reissuing the prior years auditor’s report?

Answer 2

1. Read the financial statements of the current period.
2. Compare the prior-period.
3. Obtain rep letter from successor auditor
4. Obtain rep letter from client’s management and the successor where the successor auditor will state whether the audit revealed any material matters that might affect the previous financial statements.

Question 3

When should Auditor dual date a report?

Answer 3

Dual dating is used when there is a subsequent event occurring after the original date of the auditor’s report, and the auditor wishes to extend responsibility only for the one event.

Question 4

When should a group auditor make no mention or mention the component auditor?

Answer 4

MAKE NO MENTION/ASSUME RESPONSIBILITY
* If the group engagement partner is satisfied as to the independence and the professional reputation of the component auditor.
* The engagement team should determine the type of work to be performed on the financials worked on by the components.
* Must be satisfied with the Component Auditor’s reputation and independence.

MENTION COMPONENT AUDITOR/ DIVIDE RESPONSIBILITY
* If the group engagement partner is unable to review the audit programs and audit documentation of the component auditor.
* No reference to this assumption or to the work done by Component Auditor will be included in the audit report.
* Division of responsibility is generally not permitted under ISAs.
* The report should clearly indicate that the component was not audited by the auditor of the group financial statements but was audited by the component auditor and should include the magnitude of the portion of the financial statements audited by the component auditor.
* Must be satisfied with the Component Auditor’s reputation and independence.
* An auditor would generally issue an unmodified audit opinion without an emphasis-of-matter paragraph when the auditor decides to make reference to the audit of a component auditor in the basis for opinion.

Question 5

What to do if new client does not have beg. bal. or not having consistency in accounting principles?

Answer 5

• The auditor would be unable to express an opinion on the current year’s results of operations and cash flows. The auditor could express an opinion on the statement of financial position/Balance Sheet.
• Since the scope limitation could have a pervasive effect on the financial statements (affecting all assets and liabilities), a disclaimer of opinion (and not merely a qualified opinion) is required on the income statement and statement of cash flows.