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102 Cards in this Set
- Front
- Back
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What's prepared by auditor? What do they ask?
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opinion on FS and related disclosures-presented per GAAP?; opinion on IC over financial reporting-is it effective?
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What's prepared by mgmt? What does it ask?
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opinion on IC over financial reporting-is it effective
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Purpose of audit report-asks what?
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are FS in conformity with GAAP, any unusual aspects of audit examination, any unusual matters related to entity
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Are FS in conformity with GAAP?
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provide indication of what FS would be like if GAAP were followed, provide any entity-omitted disclosures
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What are unusual aspects of audit examination?
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scope limitations and division of responsibility
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What are unusual matters related to entity?
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going-concern uncertainty, consistency, emphasis of a matter
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FS assurances range from what?
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audits to review to compilations
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What assurance require auditors to gather sufficient evidence to render an opinion?
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positive
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What assurance is provided when performing services such as reviews of annual or interim financial info?
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negative
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What are types of auditor's reports?
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standard report, unqualified opinion with modified wording, qualified opinion, adverse opinion, disclaimer of opinion
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Standard report:
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unqualified opinion
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Unqualified opinion with modifed wording:
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FS in conformity with GAAP, additional matters disclosed in report
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Qualified opinion
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Except for some matter; FS in conformity with GAAP
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Adverse opinion
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FS not in conformity with GAAP
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Disclaimer of opinion
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no opinion issued
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Seven parts of auditor's standard report:
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report title, audit report address, introductory paragraph, scope paragraph, opinion paragraph, name of CPA firm, auditor report date showing last day of field work
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What must include the word independent?
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report title
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Audit report address to who?
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BOD and stockholders to demonstrate independence
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What paragraph states that an audit has been performed; identifies the FS and appropriate dates; states that the FS are the responsibility of the entity's mgmt?
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introductory
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What paragraph states that auditor followed GAAS or PCAOB standards and indicates that audit only provides reasonable assurance?
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scope
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What paragraph communicates results of the audit?
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opinion
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Auditor is held accountable only through what date?
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audit report date showing last day of field work (audit completion date)
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Introductory paragraph-what is examined? whose responsibility?
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FS and years; auditors and mgmt
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Scope paragraph does what 3 things?
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says audit conducted in accordance with PCAOB standards, description of audit ("materiality" and "significant estimates"), and state audit provides reasonable assurance
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Opinion paragraph states what?
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if FS presented in conformity with GAAP
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What's required with IC?
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exam, report, and opinion
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If separate reports for FS and IC, what would happen?
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each would reference the other
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Reasons to issue an other than standard report?
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departure from GAAP, unable to conduct audit in accordance with GAAS (PCAOB), auditors wish to bring matters to readers' attention (unqualified with additional explanation)
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Unable to conduct audit in accordance with GAAS or PCAOB due to:
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scope limitation
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Auditors wish to bring matters to readers' attention is what kind of opinion? What kind of matters?
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unqualified with additional explanation; consistency, going concern uncertainty, rule 203 departure from GAAP, division of responsibility, emphasis of a matter
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GAAP departure not material
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standard unqualified
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GAAP departure material but not pervasive
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qualified opinion
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GAAP departure material and pervasive
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adverse opinion
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Standard unqualified report characteristics:
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no material violations of GAAP, adequate disclosures, necessary audit procedures performed (no scope limitation), no change in GAAP with material impact, no material weakness in IC, no going concern problems, auditor is independent
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Report modifications to qualified opinion when departure is material but not pervasive?
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intro and scope stay same, add explanatory preceding opinion explaining departure and detailing amounts involved, modify opinion (except for...)
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What is issued when statements are so lacking in fairness that a qualified opinion would be misleading (pervasive departure from GAAP)?
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adverse
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Report modifications to adverse opinion with material pervasive departure from GAAP:
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intro and scope stay same, add explanatory paragraph preceding opinion, change opinion (FS do not present fairly)
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Scope limitation not material
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standard unqualified
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Scope limitation material and alternative procedures are available
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standard unqualified
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Scope limitation material, no alternative procedures are available, not pervasive
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qualified
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Scope limitation material, no alternative procedures available, pervasive
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disclaimer of opinion
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What are issued when scope limitations are material but not pervasive?
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qualified (except for) opinions
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Report modifications to qualified opinions when scope limitations are material and not pervasive?
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intro stays same, scope (except as discussed in following paragraph), add explanatory paragraph preceding opinion, modify opinion paragraph (except for)
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Scope limitation: disclaimer of opinion: usually __-imposed
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client
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Report modifications: scope limitation: disclaimer of opinion:
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intro (we were engaged to audit, omit auditor's responsibility), omit scope paragraph, add explanatory p, change opinion p(we do not express an opinion)
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Scope limitation: disclaimer of opinion: issue opinion on IC?
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may if no scope limitation on that exam
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What is the report when auditors begin engagement but independence subsequently compromised?
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single paragraph, indicates auditors are not independent, doesn't say why
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Unqualified opinion with explanatory language for:
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consistency, going concern uncertainties, rule 203: justified departures from GAAP, division of responsibility, emphasis of a matter
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Consistency relates to the changes in:
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acct principles (GAAP to GAAP), form of reporting entity, nonGAAP to GAAP changes, acct principle inseparable from changes in estimates, presentation and definitions in stmt of cash flows
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Report modification for consistency: unqualified with explanatory language
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add explanatory p following opinion
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Consistency: may issue qualified opinion when:
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if change is not justified, change is not accounted for in comformity with GAAP
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Auditors are responsible to evaluate whether substantial doubt exists about ability of entity to continue in existence for:
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one year beyond date of FS
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What requires auditor to evaluate going concern for a reasonable time (not over one year from date of FS)? Permits but does not require a what?
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SAS No. 59; disclaimer of opinion when there is substantial doubt
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Going-concern report modifications:
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add explanatory paragraph following opinion p(still unqualified opinion with explanatory language); if serious uncertainty, issue disclaimer of opinion;
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Modified language for going-concern must include:
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substantial doubt and going concern
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What allows for unqualified opinions on FS that are not in conformity with GAAP if GAAP would be misleading?
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Rule 203
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Rule 203: unqualified opinion with explanatory language report modifications:
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add explanatory p either preceding or following opinion p
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Principal auditors take responsibility for work of other auditors
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standard unqualified
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Principal auditors do not take responsibility for work of other auditors but refer to other auditors by name
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obtain permission and present other auditors report
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Principal auditors do not take responsibility for work of other auditors and do not refer to other auditors by name
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auditors modify report to indicate division of responsibility (unqualified opinion)
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Principal auditors should verify other auditors what?
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reputation and independence
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Should principal auditors communicate and coordinate with other auditors?
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yes
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Options when referencing other auditors:
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take responsibility for work-standard report; name other auditors-present other auditors report with permission; refer to other auditors-modify intro, scope, and opinion paragraphs, unqualified opinion still
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If you accept responsibility for other auditor's work and it is in unqualified:
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standard report may be issued without modification
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If you assume responsibility and the other auditors report is qualified and the qualification is material to the FS:
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you must qualify your report
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If you share responsibility:
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opinion is unaffected (unqualified), modify all 3 paragraphs of standard report
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If you assume no responsibility:
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qualified opinion or disclaimer depending on materiality
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Emphasis of matter: unqualified with explanatory language report modifications:
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add explanatory paragraph after opinion discussing matter
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Other issues affecting auditors' report:
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reviews, compilations, association with unaudited FS, comparative FS, information accompanying FS
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Sometimes client doesn't need audit. Practitioners can perform __ procedures and report a __, or __, level of assurance on the FS.
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fewer; lower; no
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What are the most common FS services?
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compilations and reviews
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What are the standards for compilations and reviews of FS of non-public entities called?
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Statements on Standards for Accounting and Review Services (SSARS)
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Inquiry and analytical procedures are performed for each significant account balance
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FS reviews
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FS reviews: does accountant assess IC or perform substantive test?
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no
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What provides limited assurance that accounting is not aware of any reporting problems?
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FS review
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FS review: accountant must be what?
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independent
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Presents mgmt info in FS form without any form of assurance
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compilation
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The accountant must have general knowledge of client acct records, acct methods, and form and content of stmts
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compilation
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The accountant is not required to perform procedures to verify, corroborate, or review client info
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compilation
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The accountant must read stmts to make sure they are free from obvious material misstatement
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compilation
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If accountant believes stmts are incorrect, incomplete, or misleading in a compilation:
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must obtain any additional info necessary to prepare accurate stmts
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Can compiled stmts omit disclosures?
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only if omission is not done to mislead and is noted in compilation report
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What happens in compilations if accountant is not independent of client?
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separate paragraph added to report stating lack of independence
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Compiled stmts may only be prepared for __ entities
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nonpublic
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Association with unaudited FS: do auditors permit use of name in communication?
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yes
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Association with unaudited FS: opinion?
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disclaimer (one paragraph)-don't mention auditing procedures performed, identify known departures from GAAP, cover all unaudited prior-years' FS
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Comparative FS-continuing auditors must:
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update opinion by considering if previously issued opinions still appropriate; if not appropriate, review opinion in current report
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Comparative FS-predecessor auditors must:
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with permission present reissued report on prior-years FS along with their report on current FS; if predecessors not presented, must reference predecessors report and opinion on prior years FS
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Types of info accompanying FS
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condensed FS, "other info" presented by mgmt, quarterly and supplemental
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Info accompanying FS-determine wheter info is:
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inconsistent with FS, misstated, or omitted
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Info accompanying FS-reporting:
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don't affect opinion on FS, expand auditors report to discuss issues
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Departure from GAAP material opinion? pervasive opinion? paragraphs modified?
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qualified; adverse; opinon and explanatory
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Scope limitation material opinion? pervasive opinion? paragraphs modified?
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qualified; disclaimer; scope, opinion, explanatory
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Scope limitation: alternative procedures are available and performed opinion? client-imposed limitation opinon?
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standard; disclamer
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Lack of independence material opinion? pervasive opinion? paragraphs modified?
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disclamer; disclaimer, none, single paragraph
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Consistency material opinion? pervasive opinion? paragraphs modified?
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unqualified; unqualified; explanatory
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Going-concern material opinion? pervasive opinion? paragraphs modified?
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unqualified; disclaimer; explanatory for unqualified; opinion and explanatory for disclaimer
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Justified departure from GAAP (Rule 203) material opinion? adverse opinion? paragraphs modified?
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unqualified; unqualified; explanatory before or after opinion
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Division of responsibility material opinion? pervasive opinion? paragraphs modified?
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unqualified; unqualified; intro, scope, and opinion;
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Division of responsibility where assumed responsibility for other auditors' work opinion?
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standard
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Emphasis of a matter material opinion? pervasive opinion? paragraphs modified?
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unqualified; unqualified; explanatory
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Association with unauditied FS material opinon? pervasive opinion? paragraphs modified?
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disclaimer; disclaimer; none-single paragraph
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