Types of Reports

Question 1

What would be an example of a circumstance not considered a departure from the auditor’s unmodified report?

Answer 1

An auditor is asked to report only on the balance sheet, and the auditor can comply with relevant standards

why? - because the auditor may report on one basic financial statement and not on the others if

(1) the auditor complies with all AU-C sections relevant to the audit
(2) the audit is feasible; and
(3) the auditor can perform procedures on interrelated items;

Question 2

What are some circumstances in which an auditor may express a qualified opinion?

Answer 2

For:

(1) Circumstances Related to the Work; and
(2) Limitations Imposed by Management

Question 3

What are some situation an auditor may reasonably express an “except for” qualified opinion?

Answer 3

For:

(1) Scope Limitations; and
(2) Unjustified Change in Accounting Principle

NOTE: All qualified opinions are “except for” opinions

Question 4

Where in the auditor’s report would a qualifying opinion because of insufficiency of appropriate audit evidence go?

Answer 4

• In the auditor’s report section

E.g. “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.”

Question 5

What is a key phrase used by the auditor in the opinion paragraph of an modified (qualified) auditor’s report?

Answer 5

The auditor should use the phrase “except for” to qualify an opinion;

• followed by the basis for the qualification and a reference to the basis for qualified opinion paragraph

Question 6

What should the auditor do if he is unable to express a unqualified (unmodified) opinion because;

• a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures?

Answer 6

He should qualify his opinion and;

• state in the opinion paragraph of the auditor’s report that the qualification pertains to the possible effects on the financial statements

Question 7

What type of report should a CPA who lacks independence provide when they perform limited auditing procedures?

Answer 7

They should Disclaim an Opinion;

• the accountant should disclaim an opinion and state that he is not independent and did not audit the statements

Question 8

When can an auditor ordinarily express an unmodified opinion related to single-year financial statements?

Answer 8

• if the prior year’s financial statements were audited by another CPA whose report, which expressed an unmodified opinion, is not presented

Question 9

What would the opinion paragraph of the auditor’s report express when;

disclosing that there is a difference of opinion between the auditor and the client (e.g. auditor believes an adjustment to the financial statements should be made)?

Answer 9

Auditor’s report should express a qualified opinion

E.g. This is a basis for qualified opinion or basis for adverse opinion paragraph, depending upon the pervasiveness of the material misstatement

Question 10

What type of opinion would the auditor include in his auditor’s report for uncertainty involving future operations?

Answer 10

An unmodified opinion

Why? - because uncertainty does not require modification of the opinion

Question 11

What is a basic element of the auditor’s report for a nonissuer?

Answer 11

The procedures used depend on the auditor’s judgment

E.g. The auditor’s responsibility section states, “The procedures selected depend on the auditor’s judgment . . .”

Question 12

When can an auditor NOT express a qualified opinion?

Answer 12

WHEN; the auditor lacks independence with respect to the audited entity

Question 13

WHEN can audited financial statements contain a note that is labeled “unaudited,” disclosing an event occurring after the balance sheet date?

Answer 13

WHEN the event occurs after the date of the auditor’s original report

NOTE: auditor’s report should have the same date as the original report

Question 14

What is an accurate statement regarding U.S. generally accepted accounting principles (U.S. GAAP)?

Answer 14

U.S. GAAP are;

• Principles issued by bodies designated by the Council of the AICPA

Question 15

When would an auditor NOT accept an engagement under the ISA?

Answer 15

WHEN there is a limitation of its scope exists that may necessitate a disclaimer

Question 16

What type of report will an auditor release if;

• an issuer releases financial statements that purport to present (provide) its financial position and results of operations but omits the statement of cash flows?

Answer 16

A Qualified Opinion

• An entity that reports financial position and results of operations should provide a statement of cash flows

If NOT provided, the auditor should qualify the opinion and explain the reason in a basis for qualified opinion paragraph

Question 17

What type of report would an auditor issue if;

• the financial statements are material and pervasive?

Answer 17

An Adverse Opinion

• This type of opinion is expressed when the financial statements are NOT presented fairly in accordance with the applicable reporting framework

Question 18

When would disclaiming an opinion be inappropriate?

Answer 18

When; a company issues financial statements that purport to present financial position and results of operations but refuses to include the related statement of cash flows

Why? - Because this would result in a Qualified Opionion

Question 19

What type of opinion is expressed;

• If an auditor was able to apply other procedures and was satisfied as to the reasonableness of the account balances

Answer 19

An Unmodified Opinion

Why? - Because the CPA is satisfied as to the amounts of receivables, no scope limitation exists

E.g. NO reference to omission of the procedures or the use of alternative procedures is necessary

Question 20

What is the auditor’s responsibility for events occurring subsequent to the original report date but before issuance of the related financial statements?

Caveat: Report was dual-dated

Answer 20

The report should be limited to specific event referenced

E.g. He (the auditor) is responsible for other events only up to the original report date