Reports on Audited Financial Stmts Flashcards
provide information related to users’ understanding of Financial Statements
emphasis-of-matter paragraphs
provide information related to users’ understanding of audit, auditors’ responsibility, or auditors’ report
other-matter paragraphs
emphasis-of-matter and other-matter paragraphs collectively known as
explanatory paragraphs
AU-C 705 refers to qualified opinions, adverse opinions, and disclaimers of opinion as (blank) opinions.
modified
When group auditors decide to refer to the work and reports of component auditors, it is referred to as a(n)
division of responsibility
When the auditor finds a departure from GAAP, a(n) (blank) opinion may be issued
standard opinion if the departure is immaterial
Both prior-year audits and information that has come to the auditor’s attention since then (particularly in the most recent audit) are the basis for a(n) (blank) report
updated
When the design or operation of a control does not allow the entity’s management or employees to detect or prevent misstatements in a timely fashion, a(n) Blank______ exists.
internal control deficiency
Tax basis, cash basis, and modified cash basis are all examples of
special purpose frameworks
Other comprehensive bases of accounting (OCBOA) are also known as
special-purpose frameworks
Prospective financial information based on expected conditions and courses of action is a financial
forecast
When broker-dealers file an exemption report under Rule 17a-5, the report is subject to a(n)
(blank) engagement under AT2.
review
Comparative F/S with predecessor auditor who issued an unmodified opinion requires these two changes to the auditor report
modified opinion section, add other matter paragraph
A decline in Market Value due to the economy requires this change to the auditor report
add emphasis-of-matter paragraph
Going Concern: negative cash flows, inability to collect A/R requires this change to the auditor report
add emphasis-of-matter paragraph: going-concern section
Preparing F/S without any audit work requires this of the auditor report
no auditor report issued, engagement disclaimer of opinion issued
An evaluation of accurate/fair Summary F/S requires this change to the auditor report
no change, separate report in addition to the full audit report
An unmodified audit w/ disagreement on Mgmt Discussion & Analysis section requires this change to the auditor report
add additional section other info incl. in annual report
If auditors reviewed required supplemental info, in accordance with FASB, this is required of the audit report
add: other matter paragraph or other report (no opinion issued on supplemental info, only verifying info against F/S)
Client-imposed scope limitation requires this of the auditor report
disclaimer of opinion or withdrawal
Emphasis-of-matter paragraphs are required for these four consistency issues
- changes in acct principles
- change in form of reporting entity
- change in acct principle that is not GAAP to one that is
- change in acct principles inseparable from changes in estimates
Auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated, resulting in a(n) (blank) opinion
unmodified
Auditors have doubt about a company’s ability to continue as a going concern, resulting in a(n) (blank) opinion and report change
unmodified w/ emphasis-of-matter paragraph
The client has elected to not follow GAAP, resulting in a(n) (blank) opinion
adverse
A material misstatement is considered pervasive, resulting in a(n) (blank) opinion
adverse
Auditors determine that the possible effects on the financial statements of the inability to obtain sufficient evidence (i.e. a scope limitation) could be both material and pervasive, resulting in a(n) (blank) opinion
disclaimer of opinion
Auditors _____ an opinion when they are unable to form an opinion.
disclaim
Limitations on the scope of an audit may create a situation in which the auditors are unable to obtain sufficient ________.
evidence
Qualified opinions are issued when the financial statements are ________ misstated.
materially
Auditors may add an emphasis-of-matter paragraph that refers to a matter that is _________ presented or disclosed.
appropriately
A going concern is to be evaluated for a period not to exceed _________ beyond the date of the financial statements
one year
An emphasis-of-matter paragraph always _______ the opinion paragraph.
follows
Changes in accounting estimates ______ result in an explanatory paragraph
do not
For each critical audit matter identified in a public entity’s report, the auditor should describe these 3 things:
- considerations that identified it as a critical audit matter
- how it was addressed by the audit
- relevant F/S accounts or disclosures that relate to the CAM
The critical audit matters section is removed from the PCAOB report if the opinion is (blank) or (blank)
disclaimed or adverse (add additional paragraph in opinion section)
If internal control design or operation does not allow misstatements to be prevented or detected in timely fashion, it is a (blank)
deficiency
If internal controls are less severe than a material weakness, but important enough to merit attention to those charged with governance, it is a (blank blank)
significant deficiency
If internal controls result in reasonable possibility that a material misstatement would not be prevented or detected on a timely basis, it is a (blank blank)
material weakness
If material weakness is identified in the internal control over financial reporting, a (blank) opinion should be issued on the audit report
adverse
issuers with an aggregate market value of common equity less than $75 million are know as (blank) filers, and are/are not required to have auditor reports on the effectiveness of ICFR
non-accelerated, are not
Auditors who are reporting on financial statements that contain a material departure from GAAP should:
Express a qualified or adverse opinion and modify the Opinion Section and Basis for Opinion Section.
When auditors mention consistency in their report, a reader of the financial statements may infer that
GAAP has been not consistently observed in the current period in relation to the preceding period.
When the auditor finds a departure from GAAP, a(n) (blank) report can by issued if the departure is immaterial
standard (unmodified)
The standard auditors’ report on the financial statements for nonpublic entities is also referred to as the (blank) report, and should have a title that stresses
ASB, auditor independence
If auditors expressed a disclaimer or adverse opinion on the complete set of financial statements, an unmodified opinion can/cannot be expressed on a single financial statement.
cannot
A departure from GAAP is (blank)
when it can be isolated to a particular account group or transactions without materially affecting other accounts.
compartmentalized
The Basis for Opinion paragraph on a PCAOB audit report includes these 4 elements
indicates the responsibilities of management
describes the audit
states the firm is registered with the PCAOB
indicates the responsibilities of the audit team
