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What are the 4 paragraphs of a standard audit report?

Management Responsibility
Auditor Responsibility


What is included in Intro paragraph?

Identifies entity whose F/S are being audited
State that F/S have been audited
Identify title of each F/S
Specify date covered by each F/S


What is included in Management Responsibility paragraph?

Preparation and fair presentation of F/S
Design, Implementation, and Maintenance (DIM) of I/C


What is included in Auditor Responsibility paragraph?

Auditor responsibility to express opinion
States audit conducted in accordance with GAAS
Describes an audit


What is included in Opinion paragraph?

In accordance with AFRF


What is an emphasis of matter paragraph?

When auditor wants to emphasize matter that is properly disclosed but include matters that are of such importance that they are fundamental to the users understanding of the F/S
Goes after opinion paragraph


When would an emphasis of matter paragraph be used as an option?

Significant related party transactions
Material uncertainties
Important subsequent events
Lack of consistency in accounting principles


When is an emphasis of matter paragraph mandatory?

Auditor's opinion on revised F/s is different from before
Substantial going concern doubt
Justified change in accounting principles affecting consistency
F/S prepared with special purpose framework
F/S prepared with regulatory basis for general use


What is an other matter paragraph?

When auditor wants to communicate matters that are appropriately disclosed but would enhance users ability to understand audit


What are factors that can produce substantial doubt for going concern status?

Several years of operating losses
Negative working capital
Defaults or restructuring of debts
Losses of key customers
Denial or losses of licenses or patents


What are mitigating factors that can reduce going concern issue?

Increase ownership equity through stock issuance for cash
Dispose of marketable assets
Delay or reduce optional expenditures


What tests would auditor apply for going concern issue?

Review of debt agreements and 3rd party commitments
Read minutes of board of directors
Inquiries of legal counsel
Analytical procedure