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 Compilation 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

Funding Threshold is $750,000. 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.