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25 Cards in this Set
- Front
- Back
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What is an unqualified opinion?
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"Clean Opinion"
1) The audit has been conducted in conformity with GAAS 2) The financial statements are in conformity with GAAP |
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What are the names of the paragraphs in the standard report (unqualified opinion)
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1) Introductory
2) Scope 3) Opinion |
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Describe the introductory paragraph
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an introductory (opening) statement about the audit and responsibilties
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Describe the scope paragraph
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a scope paragraph containing statements about GAAS, lack of material misstatement, procedures performed, and that the audit enables the auditor to express an opinion
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Describe the opinion paragraph
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An opinion paragraph
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Approximatley how many situations would require modification of the wording of the standard report? Still an unqualifed opinion but with modification)
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1) part of the audit was performed by another independent auditor
2) A departure from GAAP that is justified 3) A material uncertainity affecting the financial statements 4) The auditor has substantial doubt about the entity's ability to continue as a going concern 5) A material change in accounting principles that causes financial statements to be inconsistent with those of the prior period 6) the auditor wishes to emphasize a matter regarding the financail statements but still unqualifed opinion I DG MU GC AP E |
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Describe a qualified opinion
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"except for" opinion
1) except for a material limitation in the audit scope (work performed) 2) "except for" a material departure from GAAP |
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Describe an Adverse Opinion
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This opinion states that the financial statements as a whole are NOT presented fairly in conformity with GAAP
The departure from GAAP is VERY material |
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Describe a disclaimer
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a disclaimer is technically not an opinion, but rather a statement by the auditor that an opinion cannot be expressed
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What are the three situations when a disclaimer should be issued?
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1 - a limitation in scope is VERY material
2 - the auditor has a lack of independence 3 - the auditors believe the "going concern" status of the organization is in serious doubt and an "emphasis of matter" paragraph in an otherwise unqualified opinion is not sufficient |
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Given the situation, describe modifications to be made to the standard report
Part of the audit was performed by another in dependent auditor AND the principle auditor does not want to take responsiblity for the other auditor's work |
"shared responsibility"
modification of all 3 paragraphs "other auditors" |
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a departure from GAAP is necessary to keep the financial statements from being misleading
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separate parapgraph between scope and opinion paragraph
(extremley rare and believes change from GAAP is justified) unqualified opinion w/ modification |
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Given the situation, describe modifications to be made to the standard report:
A material uncertanity affects the financial statements |
ex: BP oil spill and uncertanity of future payments
a separate paragraph after the opinion paragraph unqualified opinion w/ modification |
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Given the situation, describe modifications to be made to the standard report:
the auditor has substantial doubt about the entity's ability to continue going as a going concern |
a separate paragraph after the opinion paragraph
"substantial doubt" and "going concern" MUST be in the additional paragraph unqualified opinion w/ modification |
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Given the situation, describe modifications to be made to the standard report:
a MATERIAL change in accounting principles causes the new financial statements to be inconsistent with those of the prior period |
Ex: lifo to fifo or change of depreciaton methods
a separate paragraph after the opinion paragraph unqualified opinion w/ modification |
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Given the situation, describe modifications to be made to the standard report:
the auditor wishes to emphasize a matter regarding the financial statements but still believes it is appropriate to express an unqualified opinion |
ex: highlight related party transactions - could be find, could also not be
a separate opinion paragraph, following the original opinion paragraph unqualified opinion w/ modification |
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Given the situation, describe modifications to be made to the standard report:
part of the audit was performed by another independent auditor AND the principle auditor does not want to take responsibility for the other auditor's work |
"shared responsibility"
modification of all three paragraphs - "other auditors" unqualified opinon w/ modifications |
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What are the two situations for a qualified opinion?
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1 - "except for" a material limitation in the audit scope
2 - "except for" a material departure from GAAP |
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Given the situation, describe modifications to be made to the standard report:
"except for" a material limitation in the audit scope |
ex - unable to look at everything we wanted to
modify scope and opinon paragraphs separate explanation paragraph qualified opinion |
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Given the situation, describe modifications to be made to the standard report:
"except for" a material departure from GAAP |
rare because a client can fix it
modify opinion paragraph separate explanation paragraph qualified opinion |
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Given the situation, describe modifications to be made to the standard report:
A departure from GAAP is VERY material |
clearly state in opinon paragraph that the financial statements are not fairly presented
1 or more explanatory paragraphs adverse opinion |
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What are the three situations when a disclaimer should be issued?
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1 - a limitation in scope is VERY material
2 - the auditor has a lack of independence 3 - the auditors belive the "going concern" status of the organization is in serious doubt and that an "emphasis of matter" paragraph after an otherwise unqualified opinion is not sufficient |
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Given the situation, describe modifications to be made to the standard report:
A limitation in scope is VERY material |
a disclaimer
A disclaimer is not an opinion but rather a statement that an opinion cannot be expressed |
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Given the situation, describe modifications to be made to the standard report:
the auditor has a lack of independence |
a disclaimer
a disclaimer is not an opinon but rather a statment that an opinon cannot be expressed |
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Given the situation, describe modifications to be made to the standard report:
the auditors belive the "going concern" status of the organization is in serious doubt, and that an "emphasis of matter" paragraph after an otherwise unualified opinion is not sufficient |
a disclaimer
a disclaimer is not an opinion but rather a statment that an opinion cannot be expressed |
