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Flashcards in Audit reports II Deck (23):

The requirement for audit evidence

Sufficient and appropriate


The requirement for audit evidence

Sufficient and appropriate


Subsequent events are

Material events or transactions occurring subsequent to the balance sheet date, but prior to the issuance of the F/S that require adjustment to OR disclosure(两种类型EVENTS) in the F/S.


Subsequent events not include

Sales occurring after year-end


If an omitted audit procedure is discovered, the auditor should

1. Access the importance of the omitted procedure to the auditor's PRESENT ABILITY to support the opinion. it might be the case that other audit procedures tended to COMPENSATE for the omitted procedure. in which no further action would be necessary.
2. If no other procedures compensated for the missing one, the auditor would need to determine whether there were person relying on the F/S
3. 如果第一项compensation没有达成,且第二项达成有人使用依赖F/S, the auditor would request permission to perform substantive procedures.


U.S GAAP identified two types of subsequent events, they are

Type I events, conditions existing ON or BEFORE the balance sheet date, an ADJUSTMENT to the F/S is usually required. Type II event, conditions existing AFTER the balance sheet date, require NO adjustment to the F/S but may require significant additional disclosure.


Certain limited procedures should be applied to REQUITED SUPPLEMENTARY INFO

The required supplementary info is an essential part of F/S, but this info need NOT be audited. However, the audit report on the F/S should include an OTHER-MATTER paragraph to explain such info.


An auditor is not responsible for determining whether other info in documents containing the audited F.S and the auditor's report is properly stated.

However, the auditor should read the other info and consider whether any material inconsistencies or material misstatement of fact. An other-matter paragraph DISCLAIMING an opinion on the other info is optional .


The engagement should performed in accordance with

AICPA standards not SSARS.


Changes in accounting estimate ( depreciation method) or correction of error (数学错误等)

DO NOT affect the consistency standard.


If an accounting change has NO MATERIAL EFFECT on the comparability of the F/S

The auditor DOES NOT need to recognize (refer) to consistency in the auditor's report


If an accounting change has MATERIAL EFFECT on the comparability of the F/S

The change would be referred to in an emphasis-of-matter paragraph in


When QUALIFYING an opinion due to an inability to obtain sufficient appropriate audit evidence(GAAS) or due to inadequate disclosure(GAAP), the auditor should should refer the situation or omission

In the BASIS FOR QUALIFIED OPINION paragraph PRECEDING the opinion paragraph and in the OPINION paragraph, but NOT IN the management's or auditor 's responsibility paragraph.


When disclaiming an opinion due to an client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with GAAS,

But auditor's responsibility paragraph and opinion paragraph are NOT OMITTED.


A scope limitation is a departure from GAAS NOT GAAP. The wording in the qualified opinion paragraph regrading scope limitation should indicate that

The qualification pertains to the possible effects on the F/S and not to the scope limitation itself.


When the auditor express a qualified or adverse opinion due to material misstatement of the F/S,

The AUDITOR'S RESPONSIBILITY paragraph is modified and the auditor's report will include a "basis for modification" paragraph and a a "Qualified Opinion" or "Adverse Opinion" paragraph .


The adequate disclosure of the auditor's substantial doubt about the entity's ability to continue as a going concern will result in

Emphasis-of-matter after unmodified opinion OR DISCLAIMER of opinion(第二个选择)


If the CPA is disclaiming an opinion that is not in conformity with GAAP and provides appropriate revision to the F/S, but management refuse to accept the CPA's suggestion

No qualified or reversed opinion should provide because disclaimer of opinion is express no opinion, no qualified or reversed opinion provide a level of assurance. The CPA needs to describe the nature of the departure from GAAP in the CPA's report and state the effects on the F/S.


As long as it is FULLY disclosed, an inability to estimate the amount of loss from a future event (outcome of pending legislation) would most likely result in

Unmodified opinion.


Subsequent event is transaction or event which happens after the B/S date but before the F/S date. while subsequent period is the period between the F/S date and the auditor's report date.

B/S date to F/S date to auditor's report date.


Auditor's responsibility for subsequent events

1. post B/S transaction.
2. representation letter should be obtain from management.
3.inquiry of management and those with governance and inquiry the client's legal consul about litigation,claim etc.
4.minutes of stockholder, director and other committee meeting should be read during the subsequent period.
5. examine the latest interim F/S, compare them with the F/S under audit.


As long as it is fully disclosed, an inability to estimate the amount of loss from a future event (outcome of pending legislation) would most likely result in

an unmodified opinion


Insufficient evidence and scope limitation(其实两者是差不多一个鸡巴玩意 ) all result in

qualified opinion or disclaimer of opinion.(depend on the materiality)