Chapter 3 - Audit Reports Flashcards Preview

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Flashcards in Chapter 3 - Audit Reports Deck (24):
1

Standard Unqualified Audit Report for Non-Public Companies

Contains eight distinct parts: 1. Report Title 2. Audit Report Address 3. Introductory Paragraph 4. Management's Responsibility 5. Auditor's Responsibility 6. Opinion Paragraph 7. Name and Address of CPA Firm 8. Audit Report Date

2

Report Title

Independent Auditor's Report

3

Audit Report Address

Usually addressed to the company, its stockholders, or the board of directors.

4

Introductory Paragraph

"We performed and audit" list financial statements that were audited and their dates.

5

Management's Responsibility

Prepare FINS in accordance with GAAP.
Internal Controls over financial reporting.
FINS are free of material misstatements.

6

Auditor's Responsibility

1. Our responsibility is to express and opinion... in accordance with GAAS that requires we plan and perform and audit to obtain reasonable assurance that the FINS are free of material mistakes.
2. "Scope paragraph" Perform procedures to obtain evidence. Procedures selected depend on auditor' judgement. Consider internal controls and evaluate policies, estimates and presentation of FINS.
3. "We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

7

Opinion

Provide an opinion on whether FINS are "presented fairly".
In all material respects, the financial position of the company.
In accordance with GAAP.

8

Name and Address of CPA firm

Firm's name is used because the entire CPA firm has the legal and professional responsibility.

9

Audit report date

the date the auditor completed the auditing procedures in the field.

10

Four categories of audit reports

1. Unqualified
2. Unqualified with explanatory paragraph or modified wording
3. Qualified
4. Adverse or Disclaimer

11

Unqualified Audit Report for Public Company

Contains 3 paragraphs: 1. Introductory Paragraph 2. Scope Paragraph 3. Opinion Paragraph

12

Reasons for Unqualified w/ explanatory paragraph

1. Lack of consistent application of GAAP
2. Substantial doubt about going concern
3. Auditor agrees with a departure from accounting principles.
4. Emphasis of a matter
5. Reports involving other auditors (make no reference in the audit report, make reference in the report, qualify the opinion)

13

Reasons for a qualified opinion

1. Scope limitation
2. GAAP departure
3. Auditor is not independent

14

Disclaimer

When a scope limitation is highly material or pervasive.

15

Adverse

When a GAAP issue is highly material or pervasive.

16

PAJE

Proposed Adjusting Journal Entry

17

PRJE

Proposed Reclassifying Journal Entry

18

Qualified Report has what differences

"We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion."

BASIS FOR OPINION

QUALIFIED OPINION - "Except for"

19

T/F An audit provides a high level of assurance, but is not a guarantee, that a material misstatement will exist in the FINS

TRUE

20

T/F AICPA auditing standards provide uniform wording for the auditor's report to enable users of the FINS to understand the audit report

TRUE

21

The Introductory Paragraph states the auditor's responsibility for the preparation, presentation, and opinion on financials.

FALSE - the auditor's responsibility paragraph

22

The scope paragraph of the auditor's responsibility section should refer to GAAS.

FALSE - 1st paragraph of auditor's responsibility

23

The phrase generally accepted accounting principles can be found in the opinion paragraph.

TRUE

24

Scope Restriction Disclaimer has what differences

AUDITOR'S RESPONSIBILITY - "Because of the matter described in the Basis for Disclaimer of Opinion paragraph..."

BASIS FOR DISCLAIMER

DISCLAIMER OF OPINION - "Because of the significance of the matter... we have not bee able to obtain sufficient evidence..."