Home > Flashcards > Print Preview
The flashcards below were created by user
on FreezingBlue Flashcards. What would you like to do?
A nonissuer’s unaudited financial statements for the prior period are presented in comparative form with audited financial statements for the subsequent year. If the prior-period statements were reviewed, it could have one or the other statement
The report on the unaudited financial statements should be reissued.
The report on the audited financial statements should include an other-matter paragraph.
A nonissuer’s audited statements for the current period may be presented comparatively with the prior period’s reviewed or compiled statements. If the prior period’s report is not reissued, the auditor’s current-period report should include an other-matter paragraph that states (1) the service performed in the prior period, (2) the date of the service, (3) a description of material modifications noted in the report, and (4) that the service was not an audit and did not provide a basis for an opinion
Management believes, and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of the potential loss but fully discloses the situation in the notes to the financial statements. If management does not make an accrual in the financial statements, the auditor should express a(n)
Unmodified opinion with no additional paragraph in the auditor’s report.
If the auditor concludes that sufficient appropriate evidence supports management’s assertions about the nature of a matter involving an uncertainty, an unmodified report is ordinarily appropriate.
An auditor includes an emphasis-of-matter paragraph in an otherwise unmodified report when the entity being reported on had significant transactions with related parties. The inclusion of this paragraph
Is appropriate and would not negate the unmodified opinion.
An auditor may emphasize a matter in a separate paragraph and express an unmodified opinion. Matters to be emphasized might include that the entity has had significant related party transactions. Subsequent events and accounting matters affecting comparability (e.g., a change in the reporting entity) are other matters suitable for this treatment.
An auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. If the entity’s disclosures concerning this matter are adequate and no other issues prevail, the audit report may include a
Disclaimer of Opinion
By itself, a substantial doubt about an entity’s ability to continue as a going concern does not require a modification of the opinion paragraph. Hence, a qualified opinion would be inappropriate. However, nothing precludes the auditor from disclaiming an opinion in these circumstances.
The group engagement partner has identified a significant component of the group that is being audited by a component auditor. The group auditor intends to assume responsibility for the work of the component auditor. Accordingly,
The group engagement team should either audit the component directly or have the component auditor audit the information on its behalf.
A significant component is one that is (1) of individual financial significance to the group or (2) likely to include significant risks of material misstatement of the group financial statements. When the group engagement partner assumes responsibility for the audit of the component, the audit report does not refer to the audit of the component auditor. Thus, the group engagement team should (1) audit the financial information directly or (2) have the component auditor audit the information on its behalf, using appropriate component materiality.
would an auditor issue a report that omits any reference to a change in accounting principle or correction of a material misstatement if there was a change in the useful life used to calculate the provision for depreciation expense.
yes - A change in estimate is neither a change in accounting principle nor the correction of a material misstatement in previously issued financial statements. Thus, it requires no modification of the opinion or other recognition in the report. However, an exception is a change in estimate that is inseparable from a change in principle. The auditor evaluates and reports on this change as a change in principle.