The auditor's reporting obligations - Week 10 Flashcards
Types of modifications to an auditor’s opinion: What is an unqualified (unmodified) opinion?
An unqualified (unmodified) opinion is expressed when an auditor is satisfied in all material aspects of the financial report. The report itself has been prepared in accordance with the Corporations Act 2001. An unqualified (unmodified) opinion always communicates that an auditor has obtained sufficient appropriate evidences and he/she is reasonable confident that the financial report is free from material misstatement.
Types of modifications to an auditor’s opinion: What is a qualified opinion?
A qualified opinion is used when misstatements are material but not pervasive to the financial report. (E.g. the auditor has reservations about specific matters but, apart from these specific matters, the remainder of the financial report can be relied upon).
Types of modifications to an auditor’s opinion: What is an adverse opinion?
Effects of misstatements are so material and pervasive that the financial report as a whole is, in the auditor’s opinion, misleading or of little use.
NO Reliance should be placed on the financial report.
Types of modifications to an auditor’s opinion: What is a disclaimer of opinion?
Expressed when an auditor is unable to OBTAIN adequate evidence to form an opinion on issues. It is caused by a significant scope limitation.
NO Reliance should be placed on the financial report.
Distinguish between Emphasis of Matter paragraph and Other Matter paragraph might be used.
Emphasis of Matter and Other Matter is not an opinion, but is attached to an opinion.
The Emphasis of Matter is used to draw reader’s attention to matters that are relevant (but that does not affect the auditor’s opinion). E.g it emphasizes a matter that is appropriately presented or disclosed in the financial report.
The Other Matter emphasizes a matter that is not presented or disclosed in the financial report, but the auditor believes it is sufficiently important to be highlighted.
Under what circumstances may a limitation on the scope of an auditor’s work arise?
- circumstances beyond the control of the entity (e.g. entity’s accounting records are destroyed by fire)
If management and those charged with governance refuse to correct a material misstatement, what further action can an auditor take?
First off, the auditor must always try to encourage management to correct any material misstatements. If they disagree, an audit must.
- communicate this to the audit committee or board of directors
- or if (1) fails, the auditor’s most likely course of action is to issue an “qualified” or “adverse” opinion.
