Opinion and Auditor's Report

Question 1

What is an unmodified (unqualified) opinion?

Answer 1

An opinion that the financial statements are presented fairly, in all material respects, in accordance with the applicable framework ## Footnote Indicates no material misstatements or scope limitations.

Question 2

What are the three types of modified opinions?

Answer 2

Qualified, adverse, and disclaimer of opinion ## Footnote Each reflects different levels of materiality and pervasiveness of issues.

Question 3

When is a qualified opinion issued?

Answer 3

When misstatements or scope limitations are material but not pervasive ## Footnote The rest of the financial statements are fairly presented.

Question 4

When is an adverse opinion issued?

Answer 4

When misstatements are both material and pervasive ## Footnote Indicates the financial statements are not fairly presented.

Question 5

When is a disclaimer of opinion issued?

Answer 5

When the auditor cannot obtain sufficient appropriate audit evidence and the possible effects are both material and pervasive ## Footnote Often due to scope limitations.

Question 6

What are the parts of a standard unmodified auditor’s report?

Answer 6

Title, Addressee, Opinion, Basis for Opinion, Key Audit Matters, Management’s Responsibilities, Auditor’s Responsibilities, Other Reporting Responsibilities, Signature, Address, Date ## Footnote Required under PSA 700.

Question 7

What is the purpose of the Basis for Opinion section?

Answer 7

To explain the standards followed and provide context for the auditor’s opinion ## Footnote Follows the Opinion section in the report.

Question 8

What are Key Audit Matters (KAM)?

Answer 8

Matters that were of most significance in the audit of the financial statements ## Footnote Communicated for transparency, especially in listed entities.

Question 9

What are management’s responsibilities in the audit report?

Answer 9

Preparation and fair presentation of financial statements and internal control ## Footnote Also includes assessment of going concern.

Question 10

What are the auditor’s responsibilities in the audit report?

Answer 10

To obtain reasonable assurance that the financial statements are free from material misstatement and to express an opinion ## Footnote Includes identifying risks, testing controls, and evaluating estimates.

Question 11

What is an Emphasis of Matter paragraph?

Answer 11

A paragraph that refers to a matter appropriately disclosed in the FSs that is fundamental to users’ understanding ## Footnote Does not modify the opinion.

Question 12

What is an Other Matter paragraph?

Answer 12

A paragraph that refers to a matter not presented or disclosed in the FSs but relevant to users’ understanding of the audit or auditor’s responsibilities ## Footnote Placed after the Opinion and Emphasis of Matter paragraphs.

Question 13

What is the effect of an Emphasis of Matter paragraph on the opinion?

Answer 13

None; the opinion remains unmodified ## Footnote It highlights important disclosures without implying misstatement.

Question 14

What is the effect of an Other Matter paragraph on the opinion?

Answer 14

None; it provides additional context without modifying the opinion ## Footnote Used for matters like prior period audits by a predecessor.

Question 15

What is the auditor’s responsibility regarding other information in documents containing audited FSs?

Answer 15

To read the other information and identify material inconsistencies with the audited FSs ## Footnote The auditor’s opinion does not cover the other information.

Question 16

When is a qualified opinion appropriate?

Answer 16

When the effect of a misstatement or scope limitation is material but not pervasive ## Footnote The rest of the financial statements are fairly presented.

Question 17

When is an adverse opinion appropriate?

Answer 17

When misstatements are both material and pervasive ## Footnote Indicates the financial statements are not reliable.

Question 18

When is a disclaimer of opinion appropriate?

Answer 18

When the auditor cannot obtain sufficient appropriate audit evidence and the possible effects are both material and pervasive ## Footnote Often due to severe scope limitations.

Question 19

What is the effect of a client-imposed scope limitation that is material and pervasive?

Answer 19

Issue a disclaimer of opinion or withdraw from the engagement ## Footnote Auditor cannot obtain sufficient appropriate audit evidence.

Question 20

What is the effect of a material misstatement that is not pervasive?

Answer 20

Issue a qualified opinion ## Footnote The misstatement affects only specific areas.

Question 21

What is the effect of a material misstatement that is pervasive?

Answer 21

Issue an adverse opinion ## Footnote The misstatement affects the overall reliability of the financial statements.

Question 22

What is the effect of a material scope limitation that is not pervasive?

Answer 22

Issue a qualified opinion ## Footnote The limitation affects only specific areas.

Question 23

What is the effect of a material scope limitation that is pervasive?

Answer 23

Issue a disclaimer of opinion ## Footnote The auditor cannot form an opinion.

Question 24

What is the purpose of the “Basis for Modification” paragraph?

Answer 24

To explain the reasons for a qualified, adverse, or disclaimer of opinion ## Footnote Placed before the Opinion paragraph.

Question 25

What is the difference in the Opinion paragraph for a disclaimer?

Answer 25

States that the auditor was engaged to audit but could not obtain sufficient evidence ## Footnote Reflects inability to form an opinion.

Question 26

What is the difference in the Auditor’s Responsibility paragraph for a disclaimer?

Answer 26

States that the auditor was unable to obtain sufficient appropriate audit evidence ## Footnote Omits the usual description of audit procedures.

Question 27

What is the auditor’s responsibility if prior period FSs were audited by a predecessor?

Answer 27

Include an Other Matter paragraph stating the predecessor’s opinion, type, and date ## Footnote Required unless prohibited by law.

Question 28

What is the auditor’s responsibility if prior period FSs were not audited?

Answer 28

Disclose this in an Other Matter paragraph ## Footnote Clarifies that no opinion is expressed on prior period figures.

Question 29

What is the auditor’s responsibility if prior period FSs were misstated and not restated?

Answer 29

Express a qualified or adverse opinion on the current period FSs ## Footnote Misstatements in comparatives affect current opinion.

Question 30

What is the auditor’s responsibility if prior period FSs were misstated but restated?

Answer 30

Include an Emphasis of Matter paragraph if appropriate ## Footnote Highlights the restatement without modifying the opinion.

Question 31

What type of opinion is issued when FSs are fairly presented in all material respects?

Answer 31

Unmodified (unqualified) opinion ## Footnote Indicates no material misstatements or scope limitations.

Question 32

What type of opinion is issued when misstatements are material but not pervasive?

Answer 32

Qualified opinion ## Footnote The rest of the FSs are fairly presented.

Question 33

What type of opinion is issued when misstatements are both material and pervasive?

Answer 33

Adverse opinion ## Footnote Indicates the FSs are not reliable.

Question 34

What type of opinion is issued when the auditor cannot obtain sufficient appropriate audit evidence and the effects are material and pervasive?

Answer 34

Disclaimer of opinion ## Footnote Auditor is unable to form an opinion.

Question 35

What type of paragraph highlights a matter disclosed in the FSs that is fundamental to users’ understanding?

Answer 35

Emphasis of Matter paragraph ## Footnote Does not modify the opinion.

Question 36

What type of paragraph refers to a matter not disclosed in the FSs but relevant to users’ understanding of the audit?

Answer 36

Other Matter paragraph ## Footnote Provides additional context without modifying the opinion.

Question 37

True or False: A qualified opinion is issued when the auditor lacks independence.

Answer 37

False ## Footnote Lack of independence requires a disclaimer of opinion.

Question 38

True or False: An Emphasis of Matter paragraph modifies the auditor’s opinion.

Answer 38

False ## Footnote It highlights a matter but does not affect the opinion.

Question 39

True or False: A disclaimer of opinion is issued when the auditor cannot obtain sufficient evidence and the effects are pervasive.

Answer 39

True ## Footnote Reflects inability to form an opinion.

Question 40

True or False: The auditor’s opinion covers other information in documents containing audited FSs.

Answer 40

False ## Footnote The opinion only covers the FSs, not other information.

Question 41

What is a red flag for a potential adverse opinion?

Answer 41

Material misstatements that affect multiple areas of the FSs ## Footnote Indicates pervasiveness.

Question 42

What is a red flag for a disclaimer of opinion?

Answer 42

Client-imposed scope limitation with no alternative procedures ## Footnote Prevents auditor from obtaining sufficient evidence.

Question 43

What is a red flag for an Emphasis of Matter paragraph?

Answer 43

Significant uncertainty disclosed in the FSs (e.g., going concern) ## Footnote Auditor believes it is fundamental to users’ understanding.

Question 44

What is a red flag for an Other Matter paragraph?

Answer 44

Prior period FSs audited by a predecessor auditor ## Footnote Requires disclosure if not prohibited by law.

Question 45

What is a red flag for modification due to comparative information?

Answer 45

Unresolved misstatement in prior period FSs not restated in current FSs ## Footnote May require qualified or adverse opinion.