audit reports.xml

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audit reports.xml
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2012-05-05 00:22:21
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audit reports
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audit reports
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  1. What are the requirements for an audit report?
    Must conform to GAAP

    Consistency with prior period reporting is implied (must state if inconsistent)

    Adequacy of disclosure is implied (must state if disclosures are lacking)

    Opinion is provided - provides assurance

    Must be signed by the auditor, and dated.
  2. How should an audit report be adjusted if reporting is not consistent with the prior period?
    If inconsistent, an Unqualified Opinion is OK

    Explanatory paragraph after Opinion is added

    Otherwise, Qualified Opinion issued
  3. When is consistency not violated with respect to changes in reporting between years?
    Accounting Errors

    Reclassifications

    Prospective treatment of a new principle

    Accounting Estimate Change
  4. What assurance is provided in an audit opinion?
    The opinion states that the financial statements are fairly presented in all material respects

    The opinion states if the financials are in conformity with GAAP.
  5. What are the sections of the audit report?
    Title - States that the auditor is independent

    Address - whomever hired the auditor

    Introduction Paragraph

    Scope Paragraph

    Opinion Paragraph

    Signed and Dated by Author
  6. Which statements are included in the Scope Paragraph of the audit report?
    • GAAS was followed (IF SEC company, usse "the standard of the PCAOB")
    • Reasonable assurance about material misstatements was obtained.
    • Financial statements and disclosures are supported by evidence.
    • Management estimates evaluated
    • Accounting principles evaluated
    • Financial Statement presentation evaluated
    • Reasonable basis exists for an opinion

    If any scope limitations exist, the auditor tries to work around them and still issue an unqualified opinion if possible.
  7. For an unqualified opinion to be issued, what must be the case with all periods presented?
    A prior year’s Financial Statement used for comparative purposes must also meet criteria for an Unqualified Opinion

    If an exception arises, the Explanatory and Opinion paragraphs will address the issue

    If a prior year’s issue has been corrected, issue an Unqualified opinion and ignore the past issue
  8. What is included in an unqualified opinion paragraph with an emphasis?
    Includes:

    • Immaterial GAAP issues
    • Going Concern worries
    • Auditor shares responsibility
    • Emphasizing a particular aspect of Financial Statements
    • Unqualified Opinion/Assurances not affected

    Explanatory paragraph added after opinion
  9. What is the effect of a qualified opinion?
    A qualified opinion creates reduced assurances.

    It results from scope limitations or major inconsistencies.

    It includes material problems with GAAP, disclosures, or segment reporting.

    If there is an issue that causes a Qualified Opinion, the explanatory paragraph goes after the Scope and before the Opinion paragraphs and the Opinion paragraph refers to the issue as well.
  10. How is the audit report changed if there is Scope Limitation?
    Qualified opinion is issued.

    Scope paragraph modified

    Explanatory paragraph between Scope and Opinion paragraphs

    Opinion paragraph points out scope limitation
  11. How is the audit report modified for major inconsistencies found during the audit?
    Qualified opinion is issued.

    Scope paragraph remains unchanged

    Explanatory paragraph between Scope and Opinion paragraphs

    Opinion paragraph points out inconsistency
  12. How does a Disclaimer of Opinion affect the audit report?
    States that an opinion cannot be issued.

    Creates negative assurances

    Includes severe Scope limitation
  13. What would cause an Adverse Opinion?
    Very material GAAP and Disclosure issues would cause an Adverse Opinion.

    • If there is an issue that causes an Adverse Opinion, the explanatory paragraph goes after
    • the Scope and Before the Opinion paragraphs and the Opinion paragraph refers to the issue as well
  14. How is division of auditor responsibility disclosed?
    Disclosed in Introductory Paragraph.

    Doesn't name the other auditor without permission.

    Referenced in Opinion paragraph and division of responsibility indicated

    If other auditor is not referenced, then you take responsibility for their conclusions, so consideration of independence, experience, credentials, etc required
  15. What standards govern SSARS engagements?
    Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services)
  16. Which clients can have compilation engagements?
    Non-SEC (non-public) registrants only.
  17. What is a compilation?
    Accountant puts together financial statements with information PROVIDED BY MANAGEMENT.

    No opinion is expressed, and no assurances are given.

    Independence is not required.
  18. What disclosures are required for Compilation engagements?
    Disclosures not necessary – must state that they are not included
  19. What standards govern Review engagements?
    SSARS (Statements on Standards for Accounting and Review Services)
  20. What type of assurance is given in a Review engagement?
    Reviews give limited assurance.
  21. What procedures are required for Review engagements?
    Analytical procedures are required for reviews.

    Compare results to documented predictions.
  22. What is a Review engagement?
    Financial statements are presented with no opinion expressed, and limited assurances are given.

    Independence is required for a review engagement.
  23. What is a Forecast?
    A prospective financial statement that uses normal circumstances.

    General and limited use allowed.
  24. What is a Projection?
    A prospective financial statement using hypothetical situations.

    Only limited use by the client is allowed.
  25. What are the requirements for Agreed Upon Procedures?
    Independence is required

    Only limited use by the client is allowed.
  26. What disclosures are required for remote likelihood of losses?
    No disclosure required.
  27. What disclosure is required for a probable loss contingency?
    Accrue if estimable.

    Explanatory paragraph if not estimable.
  28. What disclosure is made if a loss contingency is reasonably possible?
    Auditor assesses need for explanatory paragraph based on loss likelihood.
  29. How is a gain contingency reported?
    Gain contingencies are not reported.
  30. How does an immaterial GAAP issue affect the audit opinion?
    It doesn't. Opinion is unqualifed.
  31. How does a material GAAP issue affect the audit opinion?
    Qualified Opinion is issued.

    Similar to Scope Limitation.

    Explanatory paragraph after Scope Paragraph.

    Opinion refers to GAAP issue.
  32. How does a very material GAAP issue affect the audit report?
    Adverse opinion is issued.

    Same paragraph structure as a Qualified opinion.
  33. How does a Going Concern issue affect the audit report?
    Unqualified opinion with an Emphasis is OK

    Explanatory paragraph is added after Opinion paragraph.
  34. What is a "Yellow Book" audit?
    An audit performed under governmental auditing standards (GAS).
  35. How do GAS standards compare to GAAS?
    GAS is more strict that GAAS.
  36. What is required under the Single Audit Act?
    A report on internal control is required.

    GAAS and GAS don't require the I/C report.

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