Fed Inc Tax Ch 3 Audit Reports

Front 1

Standard Unqualified Report parts (7)

Back 1

1. Report title (indi auditor's report)
2. Audit report address (shareholders of U-Line)
3. Intro paragraph (a. cpa firm did audit b. what financials were audited c. mgmt is responsible for fs)
4. Scope paragraph (factual stmt, in comp w/ GAAP, reasonable assurance on MMS)
5. Opinion paragraph (complied w/ GAAP, no material misstatements)
6. Name of CPA firm
7. Date audit procedures completed in field

Front 2

Conditions for Standard Unqualified Report (5)

Back 2

1. all stmts included
2. three general standards met (competent, proficient, due care, independent)
3. Sufficient and appropriate evidence gathered
4. fs are GAAP
5. no need for extra paragraph

Front 3

Categories of Audit Reports (4)

Back 3

1. Standard unqualified
2. Unqualified w/ explanatory pp or modified wording
3. Qualified
4. Adverse or Disclaimer

Front 4

Causes for Explanatory PP or Modified Wording (5)

Back 4

1. lack of GAAP
2. doubt about going concern
3. auditor agrees to go around GAAP
4. emphasis on a particular matter
5. reports involving other auditors

Front 5

Qualified Opinion

Back 5

report issued when the auditor believes that the overall FS are fairly stated but that either the scope of the audit was limited or the financial data indicated failure to follow GAAP

Front 6

Adverse Opinion

Back 6

FS are so materially misstated or misleading they do no present fairly the entity's financial position etc.

Front 7

Disclaimer of Opinion

Back 7

Auditor isn't able to become satisfied that overall FS are fairly presented or auditor isn't independent

Front 8

Materiality

Back 8

a misstatement in te FS can be considered material if knowledge of the misstatement will affect a decision of a reasonable user of the statements

Front 9

Relationship of Materiality to Type of Opinion
-Immaterial
-Material
-Highly Material

Back 9

Immaterial - user's decisions are not likely to be affected - issue Unqualified Opinion
Material - user's decisions are likely to be affected only if the info in question is important to the specific decisions being made. The overall FS are presented fairly - issue a Qualified Opinion
Highly Material - most or all user's decision based on the FS are likely to be significantly affected - issue Disclaimer or Adverse Opinion

Front 10

Materiality Decisions - Non-GAAP Condition

Back 10

1. Dollar amts compared w/ base (combine all unadjusted misstatments, look overall)
2. Measurability (lawsuit pending?)
3. Nature of item (transaction illegal or fraud, future will be material but it isn't right now, small loss into small gain,

Front 11

Acctg principle not consistently applied, substantial doubt about going concern, justified departure from GAAP, emphasis on matter and use of another auditor (if immaterial and material)

Back 11

immaterial - unqualified
material - unqualified, explanatory pp
EXCEPT use of another auditor, which would be immaterial-unqualified, and material-unqualified with modified wording

Front 12

Scope restricted by client, FS not prepared in accordance w/ GAAP, auditor not independent (immaterial and material)

Back 12

Scope- Immaterial = unqualified, Material = Qualified Scope, addt't pp and qualified opinion, but if so material, must issue Disclaimer.
FS not GAAP- Immaterial=Unqualified, Material = Addt'l pp and qualified opinion except if so material, the Adverse Opinion
Auditor not independent = Disclaimer regardless of materiality