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Flashcards in Audit Reports - Pre-Clarity Deck (36):
1

Must conform to GAAP

Consistency with prior period reporting is implied (must state if inconsistent)

Adequacy of disclosure is implied (must state if disclosures are lacking)

Opinion is provided - provides assurance

Must be signed by the auditor and dated.

Audit Reports - Pre-Clarity Project

2

If inconsistent- an Unqualified Opinion is OK

Explanatory paragraph after Opinion is added

Otherwise - Qualified Opinion issued

Audit Reports - Pre-Clarity Project

3

Accounting Errors

Reclassifications

Prospective treatment of a new principle

Accounting Estimate Change

Audit Reports - Pre-Clarity Project

4

The opinion states that the financial statements are fairly presented in all material respects

The opinion states if the financials are in conformity with GAAP.

Audit Reports - Pre-Clarity Project

5

Title - States that the auditor is independent

Address - whomever hired the auditor

Introduction Paragraph

Scope Paragraph

Opinion Paragraph

Signed and Dated by Author

Audit Reports - Pre-Clarity Project

6

GAAS was followed (IF SEC company- uses the standard of the PCAOB)
Reasonable assurance about material misstatements was obtained.
Financial statements and disclosures are supported by evidence.
Management estimates evaluated
Accounting principles evaluated
Financial Statement presentation evaluated
Reasonable basis exists for an opinion

If any scope limitations exist- the auditor tries to work around them and still issue an unqualified opinion if possible.

Audit Reports - Pre-Clarity Project

7

A prior year's Financial Statement used for comparative purposes must also meet criteria for an Unqualified Opinion

If an exception arises- the Explanatory and Opinion paragraphs will address the issue

If a prior year's issue has been corrected - issue an Unqualified opinion and ignore the past issue

Audit Reports - Pre-Clarity Project

8

Includes:

Immaterial GAAP issues
Going Concern worries
Auditor shares responsibility
Emphasizing a particular aspect of Financial Statements
Unqualified Opinion/Assurances not affected

Explanatory paragraph added after opinion

Audit Reports - Pre-Clarity Project

9

A qualified opinion creates reduced assurances.

It results from scope limitations or major inconsistencies.

It includes material problems with GAAP- disclosures- or segment reporting.

If there is an issue that causes a Qualified Opinion- the explanatory paragraph goes after the Scope and before the Opinion paragraphs and the Opinion paragraph refers to the issue as well.

Audit Reports - Pre-Clarity Project

10

Qualified opinion is issued.

Scope paragraph modified

Explanatory paragraph between Scope and Opinion paragraphs

Opinion paragraph points out scope limitation

Audit Reports - Pre-Clarity Project

11

Qualified opinion is issued.

Scope paragraph remains unchanged

Explanatory paragraph between Scope and Opinion paragraphs

Opinion paragraph points out inconsistency

Audit Reports - Pre-Clarity Project

12

States that an opinion cannot be issued.

Includes severe Scope limitation

Audit Reports - Pre-Clarity Project

13

Very material GAAP and Disclosure issues would cause an Adverse Opinion.

If there is an issue that causes an Adverse Opinion- the explanatory paragraph goes after
the Scope and Before the Opinion paragraphs and the Opinion paragraph refers to the issue as well

Audit Reports - Pre-Clarity Project

14

Disclosed in Introductory Paragraph.

Doesn't name the other auditor without permission.

Referenced in Opinion paragraph and division of responsibility indicated

If other auditor is not referenced- then you take responsibility for their conclusions- so consideration of independence- experience- credentials- etc required

Audit Reports - Pre-Clarity Project

15

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

Audit Reports - Pre-Clarity Project

16

Non-SEC (non-public) registrants only.

Audit Reports - Pre-Clarity Project

17

Accountant puts together financial statements with information PROVIDED BY MANAGEMENT.

No opinion is expressed- and no assurances are given.

Independence is not required.

Audit Reports - Pre-Clarity Project

18

Disclosures not necessary must state that they are not included

Audit Reports - Pre-Clarity Project

19

SSARS (Statements on Standards for Accounting and Review Services)

Audit Reports - Pre-Clarity Project

20

Reviews give limited assurance.

Audit Reports - Pre-Clarity Project

21

Analytical procedures are required for reviews.

Compare results to documented predictions.

Audit Reports - Pre-Clarity Project

22

Financial statements are presented with no opinion expressed- and limited assurances are given.

Independence is required for a review engagement.

Audit Reports - Pre-Clarity Project

23

A prospective financial statement that uses normal circumstances.

General and limited use allowed.

Audit Reports - Pre-Clarity Project

24

A prospective financial statement using hypothetical situations.

Only limited use by the client is allowed.

Audit Reports - Pre-Clarity Project

25

Independence is required

Only limited use by the client is allowed.

Audit Reports - Pre-Clarity Project

26

No disclosure required.

Audit Reports - Pre-Clarity Project

27

Accrue if estimable.

Explanatory paragraph if not estimable.

Audit Reports - Pre-Clarity Project

28

Auditor assesses need for explanatory paragraph based on loss likelihood.

Audit Reports - Pre-Clarity Project

29

Gain contingencies are not reported.

Audit Reports - Pre-Clarity Project

30

It doesn't. Opinion is Unqualifed.

Audit Reports - Pre-Clarity Project

31

Qualified Opinion is issued.

Similar to Scope Limitation.

Explanatory paragraph after Scope Paragraph.

Opinion refers to GAAP issue.

Audit Reports - Pre-Clarity Project

32

Adverse opinion is issued.

Same paragraph structure as a Qualified opinion.

Audit Reports - Pre-Clarity Project

33

Unqualified opinion with an Emphasis is OK

Explanatory paragraph is added after Opinion paragraph.

Audit Reports - Pre-Clarity Project

34

An audit performed under governmental auditing standards (GAS).

Audit Reports - Pre-Clarity Project

35

GAS is more strict that GAAS.

Audit Reports - Pre-Clarity Project

36

A report on internal control is required.

GAAS and GAS don't require the I/C report.

Audit Reports - Pre-Clarity Project