Session 2.2

Question 1

When is an unqualified opinion issued?

Answer 1

When the auditor has gathered sufficient appropriate evidence, the audit has been performed in accordance with Canadian Auditing standards, and the financial statements conform to GAAP

Question 2

What are other names for unqualified opinion (2)?

Answer 2

Clean
Unmodified

Question 3

How many section does the audit report contain, and where is the opinion one?

Answer 3

11 sections
The opinion is the first after Title and Addressee, and is followed by the “basis for opinion”

Question 4

What are Key Audit Matters (KAM)?

Answer 4

KAMs are any matters arising from the audit of the F/S that are communicated, or required to be communicated, to the audit committee and that:
1. relate to accounts or disclosures that are material to the financial statements
2. involved especially challenging, subjective, or complex auditor judgment

Question 5

What is the purpose of the emphasis of matter paragraph?

Answer 5

When an auditor wishes to direct special attention to a matter other than the ones mentioned in the previous sections, and the matter is properly presented or disclosed in the F/S.

Question 6

Potential reasons for emphasis paragraph? (3)

Answer 6

1. Going concern
2. Covid
3. Litigation vs the firm (not the auditor)

Question 7

What are the 2 types of adjustments to the Standard Unqualified F/S Audit Report?

Answer 7

GAAP departure
- Failure to follow the accounting framework
GAAS departure
- Failure to meet CAS (e.g., not having access to all BoD meetings’ minutes)

Question 8

What is the effect of an immaterial GAAP departure on the audit report?

Answer 8

The auditor may not change the opinion if it is immaterial. However, as it gets more material, the auditor will have to judge its effect on the overall F/S

Question 9

What are the pervasive effects of materiality on the F/S? (3)

Pervasive –> You cannot provide an opinion due to these effects

Answer 9

1. Are not confined to specific elements, accounts, or items of the financial statements
2. If so confined, represent or could represent a SUBSTANTIAL portion of the financial statements
3. With regard to disclosures, are FUNDAMENTAL to users’ UNDERSTANDING of the financial statements

Applying this guidance requires a lot of auditor judgment!

Question 10

What are the other types of opinions on audit reports? (3) (other than unqualified)

Answer 10

1. Qualified
2. Disclaimer (GAAS)
3. Adverse (GAAP)

The 2 last are for situations that are pervasively material, while the one above is material, but not pervasive

Question 11

Regarding the Types of Audit Reports
What is scope limitation?

Answer 11

An inability to obtain sufficient appropriate evidence about some component of the financial statements

Question 12

What opinion do you release for cases of scope limitation

Answer 12

Qualified opinion or disclaimer

Question 13

Regarding the Types of Audit Reports
What is non-conformity with GAAP?

Answer 13

Results when financial statements are materially affected by a departure from GAAP

Question 14

What opinion do you release for cases of non-conformity with GAAP?

Answer 14

Qualified or adverse opinion

Question 15

Regarding the Types of Audit Reports
What is a non independent auditor?

Answer 15

Results when auditor has some form of prohibited relationship with the entity

Question 16

What opinion do you release for cases of non independent auditor?

Answer 16

Issue a disclaimer

Question 17

While not having responsibility beyond the financial information contained in the report, what is the auditor required to still do?

Answer 17

The auditor is required to read the other information and consider whether it is consistent with the information contained in the audited financial statements