Audit Reports for Non-Issuers and Issuers Flashcards
If the financial statements are materially misstated and the matter is material but no pervasive, which type of opinion is issued?
Qualified opinion
If the financial statements are materially misstated and the matter is material and pervasive, which type of opinion is issued?
Adverse opinion
If there is a scope limitation and the matter is material but no pervasive, which type of opinion is issued?
Qualified opinion
If there is a scope limitation and the matter is material and pervasive, which type of opinion is issued?
Disclaimer of opinion
What are the elements of an Audit Report with an Unmodified Opinion? (non-issuer)
Independent in title
Addressee
Title “Report on the FS”
Opinion
Basis for Opinion
Substantial doubt about the entity’s ability to continue as a going concern (if relevant)
Key audit matters (if engaged)
Emphasis of matter paragraph (if relevant)
Other matter paragraph (if relevant)
Responsibilities of management for the FS
Auditor’s responsibilities for the audit of the FS
Other information sections (if relevant)
Report on other legal and regulatory requirements (if relevant)
Auditor’s signature
Auditor’s city & state
Date of audit report
Why would an auditor include an emphasis of matter paragraph in an unmodified opinion?
The auditor may determine that it is necessary to emphasize a matter in the auditor’s report without modifying the opinion.
What are circumstances that require an emphasis of matter paragraph?
Justified lack of consistency
FS prepared using a FRF generally accepted in another country
Subsequently discovered facts that become known to the auditor after the audit report release date
Special-purpose FS
What are circumstances in which the auditor may use an emphasis of matter paragraph?
Uncertainty, related party transactions & subsequent events
Going concern doubt
What are circumstances that require an other matter paragraph?
Change from opinion previously expressed on prior period FS included in the comparative FS
Prior period FS audited by a predecessor auditor included in the comparative FS
Prior period FS were not audited (but were reviewed or compiled) included in the comparative FS
Prior period FS were not audited, reviewed, or compiled included in the comparative FS
Subsequently discovered facts that become known to auditor after audit report release date
Restricted use report
When key matters are identified (and the auditor is engaged to report on them), what should be included?
The description of each key audit matter should include:
A reference to the related disclosure if any in the FS
Address why the matter was considered to be one of the most significant of the audit and therefore considered to be KAM
Address how the matter was addressed in the audit.
If there is a lack of consistency and the change is not justified, what type of opinion is issued?
Qualified opinion or Adverse opinion
If there is a lack of consistency and the change is justified, what type of opinion is issued?
Lack of consistency is not necessarily a departure from GAAP. An emphasis of matter paragraph should be included. The EOM paragraph should refer to the notes to the FS which describe the change, describe the change, and states that the auditor’s opinion is not modified for the same.
What is cash basis?
A special purpose framework, it is an other comprehensive basis of accounting.
A basis of accounting used to record cash receipts and disbursements and modification of the cash basis having substantial support.
What is tax basis?
A special purpose framework, it is an other comprehensive basis of accounting.
A basis of accounting used to file income tax returns.
What is regulatory basis?
A special purpose framework, it is an other comprehensive basis of accounting.
A basis of accounting used to comply with the financial reporting provisions of the regulatory agency.
