Audit Reports

Question 1

What should be included for the Auditor’s address?

Answer 1

The City and State where located

Question 2

What is Management Responsible for in regards to the Financial Statements?

Answer 2

Preparation and Fair Presentation of Financial Statements in accordance with the Applicable Financial Reporting Framework

Question 3

What is Management Responsible for in regards to Internal Control?

Answer 3

Internal Control Design, Implementation, Maintenance

Question 4

What are the headings in the Audit Report for an Unmodified Opinion?

Answer 4

(TIM-AA) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion

Question 5

What are the headings in the Audit Report for an Modified Opinion?

Answer 5

(TIMA-BA) Title; Introduction; Management Responsibility; Auditor Responsibility; Basis for (Modified) Opinion; Audit Opinion

Question 6

In an Unmodified Opinion with Emphasis-of-Matter / Other-Matter sections, what is the order of the headings?

Answer 6

(TIM-AA EMO) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion; Emphasis-of-Matter; Other-Matter

Question 7

What are the requirements for referencing a Component Auditor in the Audit Report?

Answer 7

Component Financial Statements must be prepared using same Financial Reporting Framework as the Group Financial Statements; Component Auditor must have performed audit in accordance with GAAS or PCAOB Standards.

Question 8

What must the Group Engagement Partner do if they assume responsibility for the Component Auditor’s work?

Answer 8

Perform additional audit procedures; Be involved in Component Auditors work; Perform Risk Assessment procedures; Assess Risk of Material Misstatement

Question 9

What standards govern SSARS engagements?

Answer 9

Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services)

Question 10

Which clients can have compilation engagements?

Answer 10

Non-SEC (non-public) registrants only.

Question 11

What is a Compilation?

Answer 11

Accountant puts together financial statements with information PROVIDED BY MANAGEMENT. No opinion is expressed and no assurances are given. Independence is not required.

Question 12

What disclosures are required for Compilation engagements?

Answer 12

Disclosures not necessary must state that they are not included

Question 13

What standards govern Review engagements?

Answer 13

SSARS (Statements on Standards for Accounting and Review Services)

Question 14

What type of assurance is given in a Review engagement?

Answer 14

Reviews give limited assurance.

Question 15

What procedures are required for Review engagements?

Answer 15

Analytical procedures are required for reviews. Compare results to documented predictions.

Question 16

What is a Review engagement?

Answer 16

Financial statements are presented with no opinion expressed- and limited assurances are given. Independence is required for a review engagement.

Question 17

What is a Forecast?

Answer 17

A prospective financial statement that uses normal circumstances. General and limited use allowed.

Question 18

What is a Projection?

Answer 18

A prospective financial statement using hypothetical situations. Only limited use by the client is allowed.

Question 19

What are the requirements for Agreed Upon Procedures?

Answer 19

Independence is required; Only limited use by the client is allowed.

Question 20

What disclosures are required for remote likelihood of losses?

Answer 20

No disclosure required.

Question 21

What disclosure is required for a probable loss contingency?

Answer 21

Accrue if estimable. Emphasis-of-Matter paragraph if not estimable.

Question 22

What disclosure is made if a loss contingency is reasonably possible?

Answer 22

Auditor assesses need for Emphasis-of-Matter paragraph based on loss likelihood.

Question 23

How is a gain contingency reported?

Answer 23

Gain contingencies are not reported.

Question 24

How does an immaterial GAAP issue affect the audit opinion?

Answer 24

It doesn’t. Opinion is Unmodified.

Question 25

How does a very material GAAP issue affect the Audit Report?

Answer 25

Modified-Adverse Opinion is issued. Emphasis-of-Matter paragraph is added after Opinion paragraph.

Question 26

How do GAS standards compare to GAAS?

Answer 26

GAS is more strict than GAAS.

Question 27

What is required under the Single Audit Act?

Answer 27

An audit performed under governmental auditing standards (GAS). A report on internal control is required. GAAS and GAS don’t require the I/C report.

Question 28

What are the rules for PCAOB explanatory paragraphs?

Answer 28

For qualified, disclaimer, or adverse opinions—paragraph precedes opinion paragraph
Consistency and going concern—paragraph follows opinion paragraph.
Others—either before or after opinion paragraph

Question 29

What are the AIPCA rules for the placement of Additional paragraphs?

Answer 29

Basis for Modification (Basis for Qualified Opinion, Basis for Adverse Opinion and Basis for Disclaimer of Opinion) Immediately preceding opinion section.

Emphasis-of-matter - After opinion section.

Other Matter After opinion section and after emphasis-of-matter section if one is in report.

Question 30

What are Service Organization Control Reports?

Answer 30

Service organizations provide processing services to customers who decide to outsource their processing of particular data. Examples of service organizations include data centers, flexible spending account servicers, and medical claims processers.

Question 31

What are the three types of examination services that the AICPA has established as a result of CPA reports on service organization controls (SOC)?

Answer 31

SOC 1: Restricted use reports on controls at a service organization relevant to a user entity’s internal control over financial reporting.
SOC 2: Restricted use reports on controls at a service organization related to security, availability, processing integrity, confidentiality, and/or privacy.
SOC 3: General use SysTrust reports related to security, availability, processing integrity, confidentiality, and/or privacy.