Audit Opinion Flashcards
(18 cards)
What are critical accounting policies
According to PCAOB auditing standards, critical accounting policies and practices are a company’s accounting policies and practices that are both most important to the portrayal of the company’s financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
When is having an emphasis-of-matter paragraph is not a requirement when reporting on which of the following special-purpose frameworks?
Regulatory Basis ( general use)
What actions alleviate doubt as to an auditors opinion on going concern
an auditor’s consideration of management’s plans may include plans to increase ownership equity as well as reduce expenditures; dispose of assets;and restructure debt.
When are except for opinions issued (qualified except for)
When there is a material misstatement not pervasive to the financial statements management does not correct (GAAP issue)
When there is a limitation of scope material but not pervasive (GAAS issue)
When is a disclaimer of opinion given
When a limitation of scope is material and pervasive (GAAS)
How is an auditors report structured
- Title indicating auditor is independent
- Who the report is addressed to
- Opinion paragraph
- Basis for opinion
- Substantial doubt going concern (if any)
- Key audit matters
- Emphasis of matter paragraph
- Other matters paragraph
- Managements responsibility
- Auditors responsibility
What is in a opinion paragraph
- What the auditor did
- Financial period audited, statements audited
- Complying accounting framework (GAAP)
- Opinion given
What is in a basis for opinion paragraph
- Statement that audit was conducted with GAAS
- Auditors ethical responsibilities were met
- Evidence is sufficient for basis of opinion
What is the substantial doubt about an entities going concern paragraph
Modification to opinion (qualified or adverse) based on listed factors, managements plans to counter the going concern
What is the key audit matters paragraph
Matters communicated to management that were in the auditors professional judgement the most significant of the audit of the financial statements in the current period. Description of each key audit matter
What opinion should be given if the auditor has a going concern issue but it is effectively resolved and disclosed by management
Unqualified opinion with an emphasis of matter paragraph
What are managements responsibilities to the financial statement in their respective paragraph
- Management used GAAP in America
- Responsibility for internal controls
- Financial statements are free from material misstatements
- Managements assessment of a going concern
What is the difference between key audit matters for issuers and critical audit matters for non issuers
For a non issuer an auditor is only responsible for communicating key audit matters when engaged to do so
What is emphasis of matter paragraph
A matter appropriately presented or disclosed in the financial statements that is of a fundamental importance to the user’s understanding it must be emphasized in the auditor’s report.
PCAOB: Explanatory paragraph
AICPA: Emphasis of matter
When are emphasis of matter paragraphs required (explanatory PCAOB)
- Justified lack of consistency (change in accounting principle, change in mistake from py)
- Subsequent discovery of facts
- Special purpose frameworks other than GAAP
May be necessary:
1. Uncertianty over accounting issues
2. Going concern
What is an other matters paragraph
Discusses matters not required to be presented or diclosed in the financial statements
When are other matter paragraphs required (explanatory PCAOB)
- Issue with prior year audited financial statements not being audited (aka reviewed or lower) and consistent with one another (different framework or error in py not restated)
- Subsequent discovery of facts depending on relevance
- Supplementary information to the industry
- Restricted use report
May be necessary:
1. Not possible to withdraw from an engagement for legal reasons
2. Further elaboration of auditor’s responsibilities
3. Reporting on more than one set of financial statements in a different special purpose framework
How are critical audit matters listed
- Identify the CAM
- Describe the conditions that led the auditor to believe it is a CAM
- Describe how the official audit matter was addressed in the audit
- Refer to the revelant financial statement accounts or disclosures that relate to the CAM
If there are no CAMs the auditor must say so
