Reports on Audit Engagements

Question 1

Reporting when evidence is unavailable (scope limitation)

Answer 1

Question 2

Elements common to standard audit reports for issuers and nonissuers

Answer 2

Question 3

Date of audit report

Answer 3

Question 4

CAM section needed?

Answer 4

Question 5

KAM - Key audit matters by report

Answer 5

Question 6

If an auditor does not possess and understanding of the clients business and industry, the auditor should ?

Answer 6

Review industry trade journals. It should research and obtain an understanding

Question 7

What is Integrated Audit

Answer 7

Question 8

Internal Control Deficiencies

Answer 8

Question 9

Disclaimer of opinion

Answer 9

Due to scope limitation

Question 10

Unmodified opinion with emphasis of matter paragraph

Answer 10

Question 11

Where in the standard report for nonissuers does the auditor disclaim an opinion on internal control?

Answer 11

Question 12

Opinion portion of unmodified report nonissuer

Answer 12

Question 13

Reporting when there is substantial doubt about going concern

Answer 13

Question 14

Which section of the standard unmodified audit report for a nonissuer references GAAS

Answer 14

Question 15

The type of opinion issued (ei qualified/unqualified) never requires a change to the 1___________ responsibilities. Only a _______ requires a change to the ____________

Answer 15

1- Management responsibilities
2 - Disclaimer of opinion
3 - Auditors responsibilities

Question 16

Auditors & managers responsibilities sections

Answer 16

Question 17

What are KAMs?

Answer 17

Question 18

Modified Audit Opinions

Answer 18

Question 19

An adverse opinion is issued when the F/S contains ______ that are _____ and _____

Answer 19

F/S contain misstatements that are material and pervasive departures from GAAP

Question 20

Substantial doubt about the entitys ability to continue as a going concern

Answer 20

Include this paragraph when managements plans do not alleviate substantial doubt about the entities ability to continue as a going concern and disclosures are adequate.

Question 21

What are Kams

Answer 21

Kams are for nonissuers, discussed with management, included in separate section of audit report.

KAMS ONLY in regular audit repots, no disclaimer/adverse op

-Risk of fraud,
-Significant event (ie. potential merger)
-Estimates (ie depreciation)

Question 22

Emphasis of matter paragraph (EOM)

Answer 22

Also a footnote disclosure. (i.e. substantial doubt about going concern has been disclosed and alleviated.)

Question 23

If theres a significant deficiency but no material weakness in internal control, what opinion do you issue?

unqualified, qualified, adverse, or disclaimor of opinion

Answer 23

unqualified

Question 24

EOMS mandatory vs optional

Answer 24

Question 25

When do you issue a adverse opinion, and what section directly references the Basis for adverse opinion section

Answer 25

When there's misstatements that are material and pervasive. The opinion section directly references the basis for adverse opinion section.

Question 26

Where is the basis for opinion located in an audit report?

Answer 26

Question 27

EOM use and example

Answer 27

Question 28

Reporting when evidence is unavailable (scope limitation)

Answer 28

Question 29

Audit opinions, example situations

Answer 29

Question 30

And auditor includes KAM only when __________

Answer 30

Engaged to do so. (for Unmodified or qualified opinions). KAMS should not be included on adverse or disclaimers unless required by law

Question 31

What is RSI

Answer 31

Required supplementary information: (ie MD&A) is required by a FAST but not part of FS. RSI does not affect an opinion but specifies if its been included and respected or not.

Question 32

RSI and CPA repot (issuer vs nonissuer)

Answer 32

Question 33

Scope limitations can be either disclaimers or qualified opinions. Why which?

Answer 33

Qualified if material but not perverse Disclaimer if material AND perverse.

Question 34

Include emphasis of matter paragraph if change in accounting principle (ie depreciation method) has a ____________________

Answer 34

Material effect on the financial statements in the current year

Question 35

When an auditor decides to issue a separate report for issuers IC, the auditor includes __ in the report on F/S

Answer 35

Includes immediately following the opinion a paragraph stating date of I/C audit, adult standards (PCAOB), control criteria (COSO) used, and opinion expressed

Question 36

If a issuer company omits cash flow statement, what type of opinion do you report

Answer 36

qualified opinion. Omitting cash flow isnt pervasive to be disclaimer

Question 37

What is Audit risk

Answer 37

Audit risk is the possibility that an auditor will issue an unmodified opinion on the fair representation of financial statements when an undetected material misstatement exists.

Question 38

Material weakness vs significant deficiency

Answer 38

A material weakness is when its reasonably possible a material misstatement would go undetected/corrected by I/C's in a timely manner. A significant deficiency is les severe than a material weakness but important enough to warrant the attention of those charged with governance.

Question 39

When an auditor decides to issue a separate report for issuers IC, the auditor includes __ in the report on F/S and I/C

Answer 39

Includes immediately following the opinion a paragraph stating date of I/C audit, adult standards (PCAOB), control criteria (COSO) used, and opinion expressed. Managements responsibility for ICFR is stated in I/C and not F/S

Question 40

Standard Unqualified Audit report on Issuers F/S - Basis for opinion notes

Answer 40

Question 41

An adverse opinion is issued only when _____

Answer 41

the auditor has obtained sufficient appropriate evidence to determine that the F/S contain material and pervasive misstatements.

Question 42

What elements should be included in the auditors report of an issuers internal controls

Answer 42

Sections that indicate the auditors opinion, define internal control, and explain inherent limitations of internal control.

Question 43

EOM things to remember

Answer 43

EOMs should have: - appropriate title - reference to matter being emphasized - Indicate where addressed in FS - State opinion is not modified

Question 44

A justified and properly disclosed change in accounting principle results in an

Answer 44

Unmodified opinion with an emphasis of matter paragraph.

Question 45

There are no CAMS in adverse or disclaimer opinions, however CAM section is ____________

Answer 45

Always required in an unqualified or qualified opinion even if no CAMs are identified.

Question 46

Departures from GAAP are justified when following gap would cause FS presentation to be ______

Answer 46

Misleading. If departure from gaap is justified, include in EOM in unmodified opinion.

Question 47

Because the audit reports on the representations (claims) of management, the report is not addressed to management. Instead it is addressed to the ____________

Answer 47

BOD, shareholders, or whoever engaged the auditor.

Question 48

Modified Audit Opinions

Answer 48

Question 49

When are Kams refering to a basis of opinion or going concern section

Answer 49

Question 50

Top Down Approach to evaluating internal controls over financial reporting

Answer 50

Question 51

When is a KAM a KAM?

Answer 51

Question 52

In a qualified opinion due to scope limit - what does the opinion section state vs the the basis for opinion section

Answer 52

The opinion section indications the qualification is due to the possible effects on the financial statements. The BASIS for opinion section explains what the scope limitation was.

Question 53

If management doesn't want to make an auditors proposed AJE that are immaterial in the aggregate, than what happens to the audit report ______

Answer 53

no disclosure is necessary and an unmodified opinion is appropriate.

Question 54

What section of an unqualified audit report identifies the applicable financial reporting framework.

Answer 54

Opinion on the financial statements.

Question 55

The PCAOB requires _______________ not _________ to state the year that the audit firm began serving consecutively as the company's auditor

Answer 55

Issuers, (not non-issuers)

Question 56

"Our responsibility is to express an opinion on ABCs, Incs F/S based on our audits" - is from which section ? 1Opinion on FS? 2Basis for opinion? 3Auditors responsibility for audits of FS? 4Responsibilities of management for FS

Answer 56

2Basis for Opinion

Question 57

When client tries to present prior period FS with CY FS which only we audited CY, we need to include a _____

Answer 57

Paragraph stating the auditor is not expressing any form of assurance or opinion on the prior period unaudited F/S

Question 58

for repeating engagement in which the prior year reported a qualified opinion, the CY report needs to _____

Answer 58

Indicate the substantive reasons for the PYs qualified opinion.

Question 59

What section of nonissuers audit report indicates the titles of the FS audited?

Answer 59

Opinion

Question 60

When an auditor qualifies an opinion in an audit of an issuer because of a a scope limitation, the auditor should modify the ________________ section and _________ paragraph

Answer 60

Basis for opinion section and opinion paragraph

Question 61

The overall objective of submitting a unmodified opinion on IC over financial reporting is to render ______

Answer 61

reasonable assurance that financial records are sufficiently reliable to permit the preparation of financial statements.

Question 62

In what section of an unmodified report for nonoissuers does the include the nature of the audit procedures performed? 1Auditors responsibilities 2Basis for opinion 3Managements responsibilities 4Opinion

Answer 62

1Auditors responsibilities