Chapter 18- ALL Flashcards
(102 cards)
1
Q
Adverse opinion
A
The auditor’s opinion that the financial statements do not present fairly in accordance with generally accepted accounting principles (or other basis of accounting) due to a pervasively material misstatement.
2
Q
Critical (or Key) Audit Matter
A
Any matter arising from the audit of the financial statements communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment.
3
Q
Disclaimer of Opinion
A
The auditor’s indication that no opinion is expressed on the financial statements.
The auditor will disclaim an opinion if a pervasive scope limitation arises or if it is determined that the auditor lacks independence.
4
Q
Explanatory Paragraph
A
A paragraph that is used under certain circumstances to provide additional explanation to users of the financial statements.
Explanatory paragraphs do not affect the auditor’s unqualified opinion.
5
Q
Generally Accepted Auditing Standards
A
Standards against which the quality of the auditor’s performance is measured.
6
Q
Materiality
A
The maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of users.
7
Q
Qualified Opinion
A
The auditor’s opinion that the financial statements present fairly, in all material respects, in accordance with generally accepted accounting principles (or other basis of accounting), except for a material misstatement that does not, however, pervasively affect users’ ability to rely on the financial statements. Can also be issued for a scope limitation that is of limited significance.
8
Q
Reasonable Assurance
A
A term that implies some risk that a material misstatement could be present in the financial statements without the auditor detecting it, even when the auditor has exercised due care.
9
Q
Representation Letter
A
A letter that corroborates oral representations made to the auditor by management or by other auditors and documents the continued appropriateness of such representations.
10
Q
Scope Limitation
A
A lack of evidence that may preclude the auditor from issuing a clean opinion, usually resulting from an inability to conduct an audit procedure considered necessary.
11
Q
Unqualified/Unmodified Opinion
A
The auditor’s opinion that the financial statements present fairly, in all material respects, the client’s financial position, results of operations, and cash flows in accordance with generally accepted accounting principles (or other basis of accounting)-that is, a “clean” opinion. “
“Unqualified” is the term used for audits conducted for public companies under PCAOB standards, while “Unmodified” is the term used for audits conducted for other entities under ASB standards.
12
Q
Describe what is meant when it is said that an auditor is “associated with” a set of financial statements.
A
An auditor is associated with financial statements when he or she has consented to the use of his or her firm’s name in a document such as an annual report.
13
Q
Distinguish between accounting changes that affect consistency and changes that do not. To what does the word consistency refer? How is it possible for an accounting change to affect comparability but not consistency?
A
Accounting changes can be categorized into changes that affect consistency and those that do not affect consistency. The word “consistency” refers to the application of accounting principles.
If a change in accounting principle or in the method of its application has a material effect on the comparability and consistency of the financial statements and the auditor concurs with the change, the auditor should refer to the change in an explanatory or emphasis-of-matter paragraph.
Accounting changes that affect comparability but do not affect consistency, such as a change in an estimate or the correction of an error that does not involve a change in accounting principle, are normally disclosed in the notes to the financial statements but do not require an explanatory or emphasis-of-matter paragraph in the auditor’s report.
An accounting change can affect comparability but not consistency because an accounting principle can be consistently applied even when the underlying data used to apply it may change.
For example, when the estimate of the useful life of a building changes, the company may still consistently apply straight-line depreciation, but the depreciation expense will not be comparable to that of the previous year due to the change in estimate.
14
Q
Give examples of a client-imposed and a condition-imposed scope limitation. Why is a client-imposed limitation generally considered more serious?
A
An example of a client-imposed scope limitation is where a client requests that the auditor not confirm accounts receivable because of concerns about creating conflicts with customers.
An example of a circumstances-imposed scope limitation is when the auditor is not engaged to conduct the audit until after year-end. Under such circumstances, the auditor may not be able to observe inventory.
Auditors should be particularly cautious when a client places a limit on the scope of the engagement because the client may be trying to prevent the auditor from discovering material misstatements.
Auditing standards suggest that when restrictions imposed by the client significantly limit the scope of the engagement, the auditor should disclaim an opinion on the financial statements.
15
Q
How does the materiality of a departure from GAAP affect the auditor’s choice of financial statement audit reports?
A
The concept of materiality plays a major role in the auditor’s choice of audit reports. If the departure from GAAP is immaterial, the auditor issues an unqualified/unmodified opinion.
If the departure from GAAP is material but not pervasive, the auditor issues a qualified (“except for”) opinion. If the departure is so pervasive that its effects are highly material, the auditor issues an adverse opinion.
For example, suppose that a client accounts for leased assets as operating leases when proper accounting requires that the leases be capitalized.
If a client has only one small piece of equipment that is accounted for inappropriately, the auditor will probably issue an unqualified/unmodified opinion because the item is not material.
However, if the client has many significant leased assets that are accounted for as operating leases instead of capitalized leases, the auditor will normally issue a qualified or adverse opinion, depending on the magnitude of the problem.
16
Q
In 2020, your firm issued an unmodified report on Tosi Corporation, a private company. During 2021, Tosi entered its first lease transaction. which vou have determined is material but not pervasive. Tosi Corporation’s management chooses to treat the transaction as an operating lease, without adopting the requirements of the new FASB leasing standard. What types of reports would you issue on the corporation’s comparative financial statements for 2020 and 2021?
A
The auditor should issue an unmodified report (“unmodified” because Tosi is a private company) on the 2020 financial statements and a qualified report on the 2021 financial statements because the current year is not in conformity with GAAP.
The non-GAAP accounting for the lease transaction should be disclosed in the audit report. The opinion on the 2021 financial statements would not be adverse because, while the misstatement is material, it is not pervasive.
17
Q
What are the auditor’s responsibilities for other information included in an entity’s annual report?
A
The auditor has no responsibility beyond the financial information contained in the report, and he or she has no obligation to perform any audit procedures to corroborate the other information.
However, auditing standards (AU-C 720) requires that the auditor read the other information and consider whether such information is consistent with the information contained in the audited financial statements.
18
Q
If the auditor determines that other information contained with the audited financial statements is incorrect and the client refuses to correct the other information, what actions can the auditor take?
A
If the auditor determines that other information contained with audited financial statements is incorrect, the auditor should request that the client correct the other information.
If the other information is not revised, the auditor should include an explanatory (or other-matter) paragraph in the audit report, withhold the report, or withdraw from the engagement.
The auditor also should communicate the material inconsistency to the client and the audit committee in writing and consider getting legal advice as to any further appropriate action.
19
Q
List three examples of “special reports.”
A
- Financial statements prepared on a basis of accounting other than GAAP (e.g. The cash basis of
accounting) - Specified elements, accounts, or items of a financial statement.
- Compliance with aspects of contractual agreements or regulatory requirements related to audited
financial statements.
(In addition to these, there are others that are beyond the scope of this book, such as financial presentations to comply with contractual agreements or regulatory provisions, and financial information presented in prescribed forms or schedules that require a prescribed form of auditor’s report.)
20
Q
List four bases for financial statements prepared on an other comprehensive basis of accounting. Why is it important that the audit report clearly identify the basis of accounting used in the preparation of the financial statements?
A
- Regulatory basis.
- Tax basis.
- Cash (or modified cash) basis.
- Contractual basis (for non-public entities).
It is important that the financial statements and the audit report clearly identify which basis of accounting is being used so that the financial statements are not confused with financial statements prepared on a GAAP basis.
21
Q
In which of the following situations would an auditor ordinarily issue an unqualified/unmodified financial statement audit opinion with no explanatory (or emphasis-of-matter/other-matter) paragraph?
a) The auditor wishes to emphasize that the entity had significant related-party transactions.
b) The auditor decides not to refer to the report of another auditor as a basis, in part, for the auditor’s opinion.
c) The entity issues financial statements that present financial position and results of operations but omits the statement of cash flows.
d) The auditor has substantial doubt about the entity’s ability to continue as a going concern, but the circumstances are fully disclosed in the financial statements.
A
b) The auditor decides not to refer to the report of another auditor as a basis, in part, for the auditor’s opinion.
22
Q
A public entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets.
This change has no material effect on the current year’s financial statements but is reasonably certain to have a substantial effect in later years. The client’s financial statements contain no material misstatements and the auditor concurs that this change is justified.
If the change is disclosed in the notes to the financial statements, the auditor should issue a report with a(n)
a) “Except for” qualified opinion.
b) Adverse opinion.
c) Unqualified opinion.
d) Consistency modification.
A
c) Unqualified opinion.
23
Q
An auditor includes a separate paragraph in an otherwise unqualified financial statement audit report to emphasize that the entity being reported upon had significant transactions with related parties. The inclusion of this separate paragraph
a) Is appropriate and would not negate the unqualified opinion.
b) Is considered an “except for” qualification of the opinion.
c) Violates auditing standards if this information is already disclosed in notes to the financial statements.
d) Necessitates a revision of the opinion paragraph to include the phrase “with the foregoing explanation.”
A
a) Is appropriate and would not negate the unqualified opinion.
24
Q
Eagle Company, a public company, had a computer failure and lost part of its financial data. As a result, the auditor was unable to obtain sufficient audit evidence relating to Eagle’s inventory account. Assuming the inventory account is at least material, the auditor would most likely choose either
a) A qualified opinion or a disclaimer of opinion.
b) A qualified opinion or an adverse opinion.
c) An unqualified opinion with no explanatory paragraph or an unqualified opinion with an explanatory paragraph.
d) A qualified opinion with no explanatory paragraph or a qualified opinion with an explanatory paragraph.
A
a) A qualified opinion or a disclaimer of opinion.
25
Tech Company has appropriately disclosed an uncertainty due to pending litigation. However, the auditor was unable to satisfy herself that all pending litigation had been identified. The auditor's decision to issue a qualified opinion on Tech's financial statements would most likely result from
a) A lack of sufficient evidence.
b) An inability to estimate the amount of loss.
c) The entity's lack of experience with such litigation.
d) A lack of insurance coverage for possible losses from such litigation.
a) A lack of sufficient evidence.
26
In which of the following circumstances would an auditor usually choose between issuing a qualified opinion or a disclaimer of opinion on a client's financial statements?
a) Departure from generally accepted accounting principles.
b) Inadequate disclosure of accounting policies.
c) Inability of the auditor to obtain sufficient appropriate evidence.
d) Unreasonable justification for a change in accounting principle.
c) Inability of the auditor to obtain sufficient appropriate evidence.
27
King, CPA, was engaged to audit the financial statements of Chang Company, a private company, after its fiscal year had ended King neither observed the inventory count nor confirmed receivables by direct communication with debtors but was satisfied that both were fairly stated after applying appropriate alternative procedures. King's financial statement audit report most likely contained a(n)
a) Qualified opinion.
b) Disclaimer of opinion.
c) Unmodified opinion.
d) Unmodified opinion with an emphasis-of-matter paragraph.
c) Unmodified opinion.
28
Comparative financial statements for a public company include the prior year's financial statements, which were audited by a predecessor auditor. The predecessor's report is not presented along with the comparative financial statements. If the predecessor's report was unqualified, the successor should
a) Express an opinion on the current year's statements alone and make no reference to the prior year's statements.
b) Indicate in the auditor's report that the predecessor auditor expressed an unqualified opinion.
c) Obtain a letter of representations from the predecessor concerning any matters that might affect the successor's opinion.
d) Disclaim an opinion.
b) Indicate in the auditor's report that the predecessor auditor expressed an unqualified opinion.
29
When reporting on comparative financial statements, which of the following circumstances should ordinarily cause the auditor to change the previously issued opinion on the prior year's financial statements?
a) The prior year's financial statements are restated following the purchase of another company in the current year.
b) A departure from generally accepted accounting principles caused an adverse opinion on the prior year's financial statements, and those prior year statements have been properly restated.
c) A change in accounting principle causes the auditor to make a consistency modification in the current year's audit report.
d) A scope limitation caused a qualified opinion on the prior year's financial statements, but the current year's opinion is properly unqualified.
b) A departure from generally accepted accounting principles caused an adverse opinion on the prior year's financial statements, and those prior year statements have been properly restated.
30
Which of the following best describes the auditor's responsibility for "other information" included in the annual report to stockholders that contains financial statements and the auditor's report?
a) The auditor has no obligation to read the "other information."
b) The auditor has no obligation to corroborate the "other information" but should read the "other information" to determine whether it is materially consistent with the financial statements.
c) The auditor should extend the examination to the extent necessary to verify the "other information."
d) The auditor must modify the auditor's report to state that the other information "is unaudited" or "is not covered by the auditor's report."
31
When reporting on financial statements prepared on the basis of accounting used for income tax purposes, the auditor should
include in the report a paragraph that
a) Emphasizes that the financial statements have not been examined in accordance with generally accepted auditing standards.
b) Refers to a tutorial that explains the income tax basis of accounting.
c) States that the income tax basis of accounting is a basis of accounting other than generally accepted accounting principles.
d) Justifies the use of the income tax basis of accounting.
c) States that the income tax basis of accounting is a basis of accounting other than generally accepted accounting principles.
32
When an auditor is asked to express an opinion on an entity's rent and royalty revenues, he or she may
a) Not accept the engagement because to do so would be tantamount to agreeing to issue a piecemeal opinion.
b) Not accept the engagement unless also engaged to audit the full financial statements of the entity.
c) Accept the engagement, provided the auditor's opinion is expressed in a special report that clearly states that only these specific accounts were audited.
d) Accept the engagement, provided distribution of the auditor's report is limited to the entity's management.
c) Accept the engagement, provided the auditor's opinion is expressed in a special report that clearly states that only these specific accounts were audited.
33
Unmodified vs Unqualified
Unmodified:
1- Title
2- Addressee
3- Opinion
4- Basis for Opinion
(Auditor’s Independence)
5- Management's Responsibility
6- Auditor's Responsibility
(Scope paragraph)
7- Signature
8- Auditor’s Address
9- Date
Unqualified:
1- Title
2- Addressee
3- Opinion
4- Basis for Opinion
(MGMT vs. Auditor Responsibility)
(Auditor’s Independence)
(Scope paragraph)
5- Critical Audit Matters
6- Signature
7- Tenure
8- Auditor’s Address
9- Date
34
The standard unmodified report =
The standard unmodified report is issued when the auditor has gathered sufficient evidence, the audit has been performed in accordance with GAAS, and the financial statements conform to GAAP.
35
Key audit matters
Those matters that, in the auditor’s professional judgment, were of most significance in the audit of financial statements of the current period. Key audit matters are selected from matters communicated with those charged with governance.
Not required, but SAS 134 provides guidance for situations when the auditor is engaged to do so.
Note that KAMs should be presented in a section titled “Key Audit Matters” after the “Basis for Opinion” section (before MGMT’s responsibility)
36
The standard unqualified report =
The standard unqualified report is issued when the auditor has gathered sufficient evidence, the audit has been performed in accordance with PCAOB standards, and the financial statements conform to GAAP.
37
Adjustments to the Standard Unqualified/Unmodified Audit Report: (5)
1. Explanatory Paragraph: Reference to report on audit of ICFR
2. Modified Wording: Opinion based in part on the report of another auditor
3. Explanatory Paragraph:
Going concern
4. Explanatory Paragraph: Lack of comparability + consistency
5. Explanatory Paragraph (EOM): Additional emphasis
38
The following is added to the opinion section if internal control also was audited (unqualified):
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 20X2 and 20X1, based on [identify control criteria, e.g., COSO] and our report dated [date of report] expressed an unqualified opinion.
39
Modified Wording: Opinion based in part on the report of another auditor-> Opinion Section ASB: (2)
ADD: “based on our audit and the report of the other auditors” to the sentence stating the auditor’s opinion.
- “In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements present fairly, in all material respects...”
ADD: paragraph referencing item
- “We did not audit the financial statements of Gardner Company, a wholly-owned subsidiary, which statements reflect total assets constituting 24 percent and 26 percent, respectively, of consolidated total assets at December 31, 2018 and 2017, and total revenues constituting 22 percent and 24 percent, respectively, of consolidated total revenues for the years then ended. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Gardner Company, is based solely on the report of the other auditors.”
No Change: Basis for Opinion, MGMT’s Responsibility, Auditor’s Responsibility, Signature, Address, Report Date
40
Modified Wording: Opinion based in part on the report of another auditor-> Opinion Section PCAOB: (2)
ADD: “and the report of the other auditors” to the sentence stating the auditor’s opinion.
- “In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements present fairly, in all material respects...”
ADD: paragraph referencing item
- “We did not audit the financial statements of Schouten Company, a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 24 percent and 26 percent, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Schouten Company, is based solely on the report of the other auditors.”
Basis for Opinion Section:
ADD: “and the report of the other auditors” to the concluding sentence.
- “We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.”
No Change: CAMs, Signature, Tenure, Address, Report Date
41
Explanatory Paragraph
MGMT has adequately disclosed financial problems
42
Qualified or Adverse
Departure from GAAP (inadequate disclosure)
43
Disclaimer
Extreme/immediate financial distress
44
(T/F): Prior year explanatory paragraph goes away with subsequent issuance.
TRUE
45
Explanatory Paragraph: Going concern- ASB
No Change: Title, Addressee, Opinion Section, Basis for Opinion, MGMT’s Responsibility, Auditor’s Responsibility, Signature, Address, Report Date
ADD: a separate section like the following AFTER the Basis for Opinion section:
Substantial Doubt About the Company’s Ability to Continue as a Going Concern:
- The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 6. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
46
Explanatory Paragraph: Going concern- PCAOB
No Change: Title, Addressee, Opinion
ADD: a separate section like the following AFTER the Opinion paragraph:
Substantial Doubt About the Company’s Ability to Continue as a Going Concern:
- The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
No Change: Basis for Opinion
Critical Audit Matters Section:
- ADD: reference to the explanatory paragraph.
No Change: Signature, Tenure, Address, Report Date
47
(T/F): A fundamental principle of accounting, based on decision-usefulness, is that financial statements should be comparable between periods.
TRUE
48
Accounting principles should be consistently applied:
FASB ASC 250 generally requires retrospective application of newly adopted principles to prior period FS unless it is impractical to determine the effects of the changes.
49
Explanatory Paragraph: Lack of Comparability + Consistency-> Change in Accounting Principle: (3)
1. Changing from one acceptable accounting principle to another acceptable accounting principle.
2. Changing from one acceptable accounting principle to a newly adopted accounting principle.
3. Changing the method of applying an acceptable accounting principle
50
Explanatory Paragraph: Lack of Comparability + Consistency-> Impact on Report: (2)
1. Note disclosure about change in accordance with the applicable reporting framework.
2. New “section” describing issue
51
Explanatory Paragraph: Lack of Comparability + Consistency-> Emphasis-of-matter paragraph: (2)
1. Public = after opinion
2. Private = after the basis for opinion section.
- If KAMs are present, may be before directly before or after depending on its relative significance.
52
Correction of a Material Misstatement in Previously Issued FS: (3)
1. A change from the inappropriate use or application of accounting principles to an acceptable accounting principle in the current year
- ex: change from replacement cost to LIFO for inventory accounting
2. A change from an incorrect to a correct classification of transactions or balances on the financial statements
- ex: reclassifying cash flows from the operating activities category to the financing activities category, because those items were incorrectly classified in the previously issued financial statements
3. An adjustment to account balances to correct a material error in previously issued financial statements
- ex: correcting an erroneous overstatement of inventory due to clerical or systems errors.
53
Some changes impact comparability but do not [materially] impact _____. These are disclosed in the footnotes and __ presented in an explanatory paragraph.
Consistency
NOT
54
3 Examples of changes that impact comparability but do not [materially] impact consistency. These are disclosed in the footnotes and not presented in an explanatory paragraph:
1. Changes in accounting principles with no material effect in CY but are expected to have a material effect in future years
2. Change in accounting estimates
3. Reclassification from an acceptable classification to another (ex. Building transferred from PP&E to investments when ready for sale)
55
If the auditor wishes to draw special attention to a particular matter other than the ones discussed previously and the matter is properly presented or disclosed in the financial statements, the auditor may choose to include an ___ ____ in the auditor’s report.
emphasis paragraph
56
If the auditor wishes to draw special attention to a particular matter other than the ones discussed previously and the matter is properly presented or disclosed in the financial statements, the auditor may choose to include an emphasis paragraph in the auditor’s report.
4 Examples of this include:
1. Significant transactions with related parties
2. Important subsequent events
3. Accounting matters that affect the comparability of the financial statements with those of the preceding period (other than those involving a change in accounting principles)
4. Uncertainty relating to the future outcome of significant litigation or regulatory actions
57
3 types of audit reports other than Unqualified/Unmodified:
1. Qualified (expect for)
2. Disclaimer
3. Adverse
58
3 Conditions for Departure from Unqualified/Unmodified Report:
1. Scope Limitation
2. Not in Conformity with GAAP
3. Auditor Not Independent
59
Scope Limitation
Results from an inability to obtain sufficient appropriate evidence about some component of the financial statements.
60
Not in Conformity with GAAP
Results when financial statements are materially affected by a departure from GAAP.
61
Auditor Not Independent
Results when auditor has some form of prohibited relationship with the entity.
62
Pervasiveness =
Effect of Materiality
63
Pervasive effects on the financial statements are those that: (3)
1. Are not confined to specific elements, accounts, or items of the financial statements;
2. If so confined, represent or could represent a substantial proportion of the financial statements; or
3. With regard to disclosures, are fundamental to users’ understanding of the financial statements.
Applying this guidance requires a lot of auditor judgment!
64
Material & Pervasive and Not in Conformity with GAAP = ___ opinion
Adverse
65
Material & Pervasive and Scope Limitation = ___ opinion
Disclaimer
66
Material & NOT Pervasive and Not in Conformity with GAAP = ___ opinion
Qualified
67
Material & NOT Pervasive and Scope Limitation = ___ opinion
Qualified
68
None or immaterial & financial statements materially correct = ___ opinion
unmodified (unqualified)
69
(T/F): Under PCAOB standards auditor SHOULD state the reasons for lack of independence or describe any audit procedures performed.
FALSE -> they should NOT
70
(T/F): Under ASB standards the auditor will not issue a report unless required to do so by law or regulation, but if issued (same as above) MAY choose to provide reasons for lack of independence, but MUST include all of the reasons if they do (so, maybe don’t)
TRUE
71
Public =
Issuer
72
Private =
Non-Issuer
73
Barefield Corporation, a wholly owned subsidiary of Sandy, Inc., is audited by another CPA firm. As the auditor of Sandy, Inc., you have assured yourself of the other CPA firm’s independence and professional reputation. However, you are unwilling to take complete responsibility for its audit work.
What audit report would you issue?
What areas would it affect a private and public company report?
Reliance on Other Auditors: Unqualified with modifications: The auditor would issue an unqualified audit report with modified wording for the reliance on the other auditors. In this case, the principal auditor does not intend to take responsibility for the other auditor's work.
Private: Unmodified -> 1) Opinion Section (modify) & 2) Explanatory Paragraph Section (Part of the opinion section)
Public: Unqualified -> 1) Opinion Section (modify), 2) Basis of Opinion Section (modify), & 3) Explanatory Paragraph Section (part of the opinion section)
74
The management of Bonner Corporation has decided to exclude the statement of cash flows from its financial statements because it believes that its bankers do not find the statement to be very useful.
What audit report would you issue?
What areas would it affect a private and public company report?
Departure from GAAP: Qualified: The auditor should issue a qualified audit report because management has not complied with GAAP. The auditor is not required to prepare the statement of cash flows for disclosure in the audit report.
Private: Qualified -> 1) Opinion Section (modify) 2) Basis of Opinion Section (modify), & 3) Explanatory Paragraph Section (part of the basis of opinion section)
Public: Qualified -> 1) Opinion Section (modify), & 2) Explanatory Paragraph Section (part of the opinion section)
75
You are auditing Diverse Carbon, a manufacturer of nerve gas for the military, for the year ended September 30. On September 1, one of its manufacturing plants caught fire, releasing nerve gas into the surrounding area. Two thousand people were killed and numerous others paralyzed. The company’s legal counsel indicates that the company is liable and that the amount of the liability can be reasonably estimated, but the company refuses to disclose this information in the financial statements.
What audit report would you issue?
What areas would it affect a private and public company report?
Departure from GAAP: Adverse: This approach is not in accordance with GAAP because such contingencies must be disclosed in the notes to the financial statements if the amount of the contingency can be reasonably estimated and the loss is probable. A departure from GAAP such as this one requires either a qualified or an adverse opinion, depending on the materiality of the item in question. In this case the potential settlement is likely to be very large given the proportions of the tragedy in terms of human loss and suffering. In addition, the tragedy may well threaten the company’s ability to be involved in similar projects in the future and perhaps its own survival. Thus, an adverse opinion is very likely the most appropriate response.
Private: Adverse -> 1) Opinion Section (modify) 2) Basis of Opinion Section (modify), & 3) Explanatory Paragraph Section (part of the basis of opinion section)
Public: Adverse -> 1) Opinion Section (modify), 2) Explanatory Paragraph Section (part of the opinion section), CAM section (omit)
76
During your audit of Cuccia Coal Company, the controller, Tracy Tricks, refuses to allow you to confirm accounts receivable because she is concerned about complaints from her customers. You are unable to satisfy yourself about accounts receivable by other audit procedures and you are concerned about Tracy’s true motives.
What audit report would you issue?
What areas would it affect a private and public company report?
Scope Limitation: Disclaimer (pervasive): Because the client wouldn’t allow the confirmations to be sent, the appropriate response would generally be either a qualified opinion or a disclaimer of opinion for a scope limitation imposed by the client’s management, depending on the materiality of accounts receivable. However, even if accounts receivable isn’t highly material, if the auditor suspects fraud by upper management, the scope limitation would merit a disclaimer.
Private: Disclaimer -> 1) Opinion Section (modify) 2) Basis of Opinion Section (modify), 3) Auditor Responsibility Section (modify), & 4) Explanatory Paragraph Section (part of the basis of opinion section)
Public: Disclaimer -> 1) Opinion Section (modify), 2) Basis for Opinion (modify), 3) Explanatory Paragraph Section (part of the opinion section), 4) CAM section (omit)
77
On January 31, Asare Toy Manufacturing hired your firm to audit the company’s financial statements for the prior year. You were unable to observe the client’s inventory on December 31. However, you were able to satisfy yourself about the inventory balance using other auditing procedures.
What audit report would you issue?
What areas would it affect a private and public company report?
No Issue: Standard: Since the auditor is satisfied about the inventory balance using alternative audit procedures, a standard unqualified audit report can be issued. The alternative audit procedures would normally include a physical count subsequent to year end and reconciliation to the balance at the end of the reporting period.
Private: Unmodified-> No change to sections (no explanatory paragraph needed)
Public: Unqualified -> No change to sections (no explanatory paragraph needed)
78
Gelato Bros., Inc., leases its manufacturing facility from a partnership controlled by the chief executive officer and major shareholder of Gelato. Your review of the lease indicates that the rental terms are in excess of rental terms for similar buildings in the area. The company refuses to disclose this related‐party transaction in the footnotes. You determine that the omitted disclosures are material, but not pervasive.
What audit report would you issue?
What areas would it affect a private and public company report?
Departure from GAAP: Qualified: Since the client fails to disclose the related‐party transaction, the auditor should issue a qualified or adverse audit report depending on the materiality of the matter. The client’s failure to disclose the related parties means that the financial statements do not comply with GAAP.
Private: Qualified -> 1) Opinion Section (modify), 2) Basis of Opinion Section (modify), & 3) Explanatory Paragraph Section (part of the basis of opinion section)
Public: Qualified -> 1) Opinion Section (modify), & 2) Explanatory Paragraph Section (part of the opinion section), 4) CAM section (omit)
79
Johnstone Manufacturing Company has used the double‐declining balance method to depreciate its machinery. During the current year, management switched to the straight‐line method because it felt that it better represented the utilization of the assets. You concur with its decision. All information is adequately disclosed in the financial statements.
What audit report would you issue?
What areas would it affect a private and public company report?
Change in ACCT Principle: Unqualified with modifications: Recall that the instructions to the problem indicate the assumption that all matters listed are at least material. Since the change in accounting principle is properly accounted for, the auditor should issue an unqualified audit report with an explanatory paragraph for a lack of consistency in the application of GAAP.
Private: Unmodified -> No change to sections (explanatory paragraph after basis of opinion)
Public: Unqualified -> No change to sections (explanatory paragraph before basis of opinion)
80
Walker Computers is suing your client, Super Software, for royalties over patent infringement. Super Software’s outside legal counsel assures you, and you agree, that Walker’s case is completely without merit. Super Software does not disclose any contingency relating to the case.
What audit report would you issue?
What areas would it affect a private and public company report?
Contingent Liability w/ Remote Possibility: Standard unqualified/unmodified: The auditor should issue a standard unmodified audit report. As long as this uncertainty is properly disclosed or accounted for in accordance with GAAP, the auditor need not modify the audit report. In this case, a negative outcome for this uncertainty appears to be remote. Therefore, the client is not required to disclose the uncertainty in the financial statements.
Private: Unmodified -> No change to sections (no explanatory paragraph needed)
Public: Unqualified -> No change to sections (no explanatory paragraph needed)
81
In prior years, Worcester Wool Mills has used current market prices to value its inventory of raw wool. During the current year, Worcester changed to FIFO for valuing raw wool.
What audit report would you issue?
What areas would it affect a private and public company report?
Correction of an Error: Standard with EOM: This is a correction of an error in principle because the use of replacement cost to value inventory is not in accordance with GAAP. The auditor should modify the standard unmodified report by adding an emphasis‐of‐matter paragraph describing the change from replacement cost to FIFO for valuing inventory.
Private: Unmodified -> No change to sections (explanatory paragraph after basis of opinion)
Public: Unqualified -> No change to sections (explanatory paragraph before basis of opinion)
82
Upon review of the recent history of the lives of its specialized service trucks, Gas Leak Technology justifiably changed the service lives for depreciation purposes on its trucks from five years to three years. This change resulted in a material amount of additional depreciation expense.
What audit report would you issue?
What areas would it affect a private and public company report?
Change in ACCT Estimate: Standard: This is a change in accounting estimate. Such a change does not affect consistency in the application of accounting principles, and the auditor should thus issue a standard unmodified audit report.
Private: Unmodified -> No change to sections (no explanatory paragraph needed)
Public: Unqualified -> No change to sections (no explanatory paragraph needed)
83
During the audit of Brannon Bakery Equipment, you found that a material amount of inventory had been excluded from the company’s financial statements. After discussing this problem with management, you become convinced that it was an unintentional oversight. Management appropriately corrected the error prior to your finalization of field work.
What audit report would you issue?
What areas would it affect a private and public company report?
No Issue: Standard: The auditor should issue a standard unmodified audit report because the client corrected the mistake before issuing the financial statements.
Private: Unmodified -> No change to sections (no explanatory paragraph needed)
Public: Unqualified -> No change to sections (no explanatory paragraph needed)
84
Jay Rich, CPA, holds 10 percent of the stock in Rothenburg Construction Company. The board of directors of Rothenburg asks Rich to conduct its audit. Rich completes the audit and determines that the financial statements present fairly in accordance with generally accepted accounting principles.
What audit report would you issue?
What areas would it affect a private and public company report?
Not Independent: Disclaimer: The CPA is not independent of the company but the how the lack of independence should be handled depends on whether Rothenburg is a public company. Under PCAOB standards the auditor should issue a disclaimer for a lack of independence, and the auditor is not allowed to disclose the reasons for the auditor’s lack of independence. Under ASB standards (for non‐public entities), the auditor will not issue a report unless required to do so by law or regulation, but similar to PCAOB standards, if issued, the report should disclaim an opinion due to lack of independence. However, under ASB standards, the auditor may choose to disclose the reasons for the lack of independence, but if the auditor so chooses, all relevant reasons for the lack of independence must be included.
Private: Disclaimer -> 1) Opinion Section (modify), 2) Basis for Opinion (omit), 3) MGMT responsibility section (omit), 4) Auditor responsibility section (omit) & 5) Explanatory paragraph (not needed)
Public: Disclaimer -> 1) Opinion Section (modify), 2) Basis for Opinion (omit), 3) Explanatory paragraph (not needed), & 4) CAM Section (omit)
85
During your audit of Walker, Inc, you noticed recurring operating losses and working capital deficiencies that cause you to have substantial doubt about Walker’s ability to continue as a going concern for a reasonable period of time. Walker’s management has reviewed the situation, and you deem the related financial statement disclosures adequate.
What audit report would you issue?
What areas would it affect a private and public company report?
Going Concern: Standard with explanatory paragraph (adequately disclosed): Going concern issue identified, but adequately disclosed. Immediate distress not identified.
Private: Unmodified -> No change to sections (explanatory paragraph after basis of opinion)
Public: Unqualified -> Modify CAM section (explanatory paragraph before basis of opinion)
86
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: Barefield Corporation, a wholly owned subsidiary of Sandy, Inc., is audited by another CPA firm. As the auditor of Sandy, Inc., you have assured yourself of the other CPA firm's independence and professional reputation. However, you are unwilling to take complete responsibility for its audit work.
The auditor would issue an unqualified audit report with explanatory language for the reliance on the other auditors. In this case, the principal auditor does not intend to take responsibility for the other auditor's work.
87
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: The management of Bonner Corporation has decided to exclude the statement of cash flows from its financial statements because it believes that its bankers do not find the statement to be very useful.
The auditor should issue a qualified audit report because management has not complied with GAAP. The auditor is not required to prepare the statement of cash flows for disclosure in the audit report.
88
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: You are auditing Diverse Carbon, a manufacturer of nerve gas for the military, for the year ended September 30. On September 1, one of its manufacturing plants caught fire, releasing nerve gas into the surrounding area. Two thousand people were killed and numerous others paralyzed. The company's legal counsel indicates that the company is liable and that the amount of the liability can be reasonably estimated, but the company refuses to disclose this information in the financial statements.
This approach is not in accordance with GAAP because such contingencies must be recognized by an accrual in the financial statements if the amount of the contingency can be reasonably estimated and the loss is probable. A departure from GAAP such as this one requires either a qualified or an adverse opinion, depending on the materiality of the item in question. In this case the potential settlement is likely to be very large given the proportions of the tragedy in terms of human loss and suffering. In addition, the tragedy may well threaten the company’s ability to be involved in similar projects in the future and perhaps its own survival. Thus, an adverse opinion is very likely the most appropriate response.
89
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: During your audit of Cuccia Coal Company, the controller, Tracy Tricks, refuses to allow you to confirm accounts receivable because she is concerned about complaints from her customers. You are unable to satisfy yourself about accounts receivable by other audit procedures and you are concerned about Tracy's true motives.
Because the client wouldn’t allow the confirmations to be sent, the appropriate response would generally be either a qualified opinion or a disclaimer of opinion for a scope limitation imposed by the client’s management, depending on the materiality of accounts receivable. However, even if accounts receivable isn’t highly material, if the auditor suspects fraud by upper management, the scope limitation would merit a disclaimer.
90
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: On January 31, Asare Toy Manufacturing hired your firm to audit the company's financial statements for the prior year. You were unable to observe the client's inventory on December 31. However, you were able to satisfy yourself about the inventory balance using other auditing procedures.
Since the auditor is satisfied about the inventory balance using alternative audit procedures, a standard unqualified audit report can be issued. The alternative audit procedures would normally include a physical count subsequent to year end and reconciliation to the balance at the end of the reporting period.
91
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: Gelato Bros., Inc., leases its manufacturing facility from a partnership controlled by the chief executive officer and major shareholder of Gelato. Your review of the lease indicates that the rental terms are in excess of rental terms for similar buildings in the area. The company refuses to disclose this related-party transaction in the notes to the financial statements.
The client’s failure to disclose the related party transaction represents a GAAP departure. Since there is a departure from GAAP, the auditor should issue a qualified or adverse audit report depending on the materiality of the matter.
92
For the following independent situation, indicate the type of financial statement audit report that you would issue and briefly explain your reasoning. Assume that it is at least material.
Situation: Johnstone Manufacturing Company has used the double-declining balance method to depreciate its machinery.
During the current year, management switched to the straight-line method because it felt that it better represented the utilization of the assets. You concur with its decision. All information is adequately disclosed in the financial statements.
Recall that the instructions to the problem indicate the assumption that all matters listed are at least material. Since the change in accounting principle is properly accounted for, the auditor should issue an unqualified audit report with an explanatory paragraph for a lack of consistency in the application of GAAP.
93
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: Abadi Mines, Inc., uses LIFO for valuing inventories held in the United States and FIFO for inventories produced and held in its foreign operations.
The auditor should issue a standard unqualified/unmodified audit report. It is acceptable for an entity to use different inventory methods in different international regions. Many countries do not allow LIFO, and it can be costly for the entity to maintain inventory records using both valuation methods.
94
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: Walker Computers is suing your client, Super Software, for royalties over patent infringement. Super Software's outside legal counsel assures you, and you agree, that Walker's case is completely without merit. Super Software does not disclose any contingency relating to the case.
The auditor should issue a standard unqualified/unmodified audit report so long as this uncertainty is properly disclosed or accounted for in accordance with GAAP. In this case, a negative outcome for this uncertainty appears to be remote. Therefore, the client is not required to disclose the uncertainty in the financial statements.
95
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: In prior years, Worcester Wool Mills has used current market prices to value its inventory of raw wool. During the current year, Worcester changed to FIFO for valuing raw wool.
This is a correction of an error in principle because the use of replacement cost to value inventory is not in accordance with GAAP. The auditor should add an explanatory or emphasis-of-matter paragraph describing the change from replacement cost to FIFO for valuing inventory to the standard unqualified/unmodified report.
96
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: Upon review of the recent history of the lives of its specialized service trucks, Gas Leak Technology justifiably changed the service lives for depreciation purposes on its trucks from five years to three years. This change resulted in a material amount of additional depreciation expense.
This is a change in accounting estimate. Such a change does not affect consistency in the application of accounting principles, and the auditor should thus issue a standard unqualified/unmodified audit report.
97
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: During the audit of Kwame Bakery Equipment, you found that a material amount of inventory had been excluded from the company's financial statements. After discussing this problem with management, you become convinced that it was an unintentional oversight. Management appropriately corrected the error prior to your finalization of field work.
The auditor should issue a standard unqualified/unmodified audit report because the client corrected the mistake before issuing the financial statements.
98
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: Jay Rich, CPA, holds 10 percent of the stock in Rothenburg Construction Company. The board of directors of Rothenburg asks Rich to conduct its audit. Rich completes the audit and determines that the financial statements present fairly in accordance with generally accepted accounting principles.
The CPA is not independent of the company but how the lack of independence should be handled depends on whether Rothenburg is a public company. Under PCAOB standards the auditor should issue a disclaimer for a lack of independence, and the auditor is not allowed to disclose the reasons for the auditor’s lack of independence. Under ASB standards (for non-public entities), the auditor will not issue a report unless required to do so by law or regulation, but similar to PCAOB standards, if issued, the report should disclaim an opinion due to lack of independence. However, under ASB standards, the auditor may choose to disclose the reasons for the lack of independence, but if the auditor so chooses, all relevant reasons for the lack of independence must be included.
99
For the following independent situation, indicate the reason for and the type of financial statement audit report that you would issue. Assume that the item is at least material.
Situation: Ramamoorthi Savings and Loan's financial condition has been deteriorating for the last five years. Most of its problems result from loans made to real estate developers in Saint Johns County. Your review of the loan portfolio indicates that there should be a major increase in the loan-loss reserve. Based on your calculations, the proposed writedown of the loans will put Ramamoorthi into violation of the state's capital requirements. The client refuses to make the adjustment or to disclose the possible going concern issue in the notes to the financial statements.
If the client refuses to make the adjustment to the loan-loss reserve, the auditor should issue a qualified or adverse opinion because the financial statements will not be in accordance with GAAP. The auditor may also have substantial doubt about the entity’s ability to continue as a going concern, which could result in the addition of an explanatory or emphasis-of-matter paragraph to the audit opinion to disclose the going concern issues. If the auditor concludes that there is a going concern problem and the client refuses to disclose the issue in the notes to the financial statements, the auditor’s opinion will be adverse.
100
Required: Review the following auditor’s report and identify any errors and/or omissions. The opinion is determined to be an unqualified opinion for the comparative financial statements of Garnet & Black Company, an issuer, for the years ended December 31, 20X2, and 20X1.
Report of Accounting Firm
To the Board of Directors and Shareholders of Garnet & Black Company
We have audited the financial statements of Garnet & Black Company (the “Company”) as of and for the years ended December 31, 20X2 and 20X1. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for each of the years in the period ended December 31, 20X2, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 20X2 and 20X1, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 15, 20X2, expressed an unqualified opinion.
Basis for Opinion
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Darla & Moore
Darla & Moore, CPAs Columbia, South Carolina February 15
1. Title
a. Should be “Report of Independent Registered Public Accounting Firm”
2. Addressee
a. No issue
3. Opinion
a. Missing section title “Opinion on the Financial Statements”
b. Need to reference the financial statements [and notes] audited.
4. Basis for Opinion
a. Missing management’s responsibility statement
b. Missing auditor’s responsibility statement
c. Missing statement “We believe that our audits provide a reasonable basis for our opinion.”
5. Critical Audit Matters
a. Missing section title “Critical Audit Matters”
b. Missing reference to CAMs (either items identified or statement saying none identified).
6. Signature
a. No issue
7. Tenure
a. Missing Tenure reference
8. Auditor’s Address
a. No issue
9. Date
a. Missing year
101
Required: Review the following auditor’s report and identify any errors and/or omissions. The opinion is determined to be an unqualified opinion for the comparative financial statements of Gamecock Company, a non-issuer, for the years ended December 31, 20X1, and 20X0.
Audit Report
To the Gamecock Company:
We have audited the financial statements of Gamecock Company, which comprise the balance sheets as of December 31, 20X1 and 20X0, and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Gamecock Company as of December 31, 20X1, and 20X0, and the results of its operations and its cash flows for the years then ended.
Basis for Opinion
We conducted our audits in accordance with accounting principles generally accepted in the United States of America (GAAP). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Gamecock Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financial statements.
In performing an audit in accordance with GAAS, we:
* Exercise professional judgment and maintain professional skepticism throughout the audit.
* Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements.
* Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Gamecock Company’s internal
control. Accordingly, no such opinion is expressed.
* Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluate the overall presentation of the financial statements.
* Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial
doubt about Gamecock Company’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Darla & Moore
Darla & Moore, CPAs
South Carolina February 20X2
1. Title
a. Needs the word “independent.” Should be “Independent Auditor’s Report.”
2. Addressee
a. Needs to be addressed to the appropriate parties. Typically, would be to the “shareholders and
3. Opinion the board of directors”
a. Missing the Opinion section header
b. Needs reference to GAAP (“in accordance with accounting principles generally accepted in the
United States of America.”)
4. Basis for Opinion
a. Needs reference to GAAS, not GAAP.
5. Management’s Responsibility
a. Section header should be “Responsibilities of Management for the Financial Statements.”
b. Missing going concern statement
6. Auditor’s Responsibility
a. Missing section title.
7. Signature
a. No issue
8. Auditor’s Address
a. Missing city
9. Date
a. Missing day in date
102
