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True / False: When comparative FS are presented, the auditor needs to identify only on which FS the audit is expressed.
- All dates of the comparative FS must be identified, and then the auditor states on which an audit opinion is expressed.
When comparative FS are included, how does the auditor handle the FS information that were previously audited?
- Update the previous FS, which can mean reaffirm, ORChange the original opinion based on new conditions or info the auditor has learned during the current engagement, OR
- Clearly indicate if the previous FS info is not covered by the current engagement
True / False: The auditor's current year report will generally cover the FS for all years presented.
An auditor performs an audit on the current year and is willing to issue an unqualified (unmodified) opinion, however, the previous year's information cannot be verified. What opinion is offered and which paragraph(s), if any, are modified?
- An unqualified (unmodified) opinion is offered for the current year FS and the dates of each FS must be identified.
- The Auditor's Responsibilities paragraph is altered to state for which FS and their date(s) sufficient and appropriate evidence was obtained.
- A Basis of Disclaimer paragraph is added and the previous FS and their date(s) noted, as well as the reasons for the disclaimer.
- A Disclaimer of Opinion paragraph is added prior to the Opinion paragraph stating which FS and their date(s) are disclaimed and referring to the Basis for Disclaimer paragraph.
- The Opinion paragraph is written as typical except only including the FS and their date(s) that receive the unqualified opinion.
How does the auditor handle a situation when the prior year's FS were not audited and the current year's FS are being audited?
- This is a scope limitation.
- If the opening balances cannot be ascertained (verified) a disclaimer of opinion on the Statements of Income, Retained Earnings, and Cash Flows may be required.
How does the auditor handle a situation where the previous auditor's report was qualified due to a departure from the framework, but these FS are now restated for the current year's report?
- The auditor should disclose the reason(s) in an Emphasis-of-Matter or Other-Matter paragraph (auditor may choose) following the Opinion, or an explanatory preceeding the Opinion. Include the following
- "only D-O-R-C-S change their mind"
- ** Date of the auditor's previous report
- ** Previous Opinion
- ** Reason for previous opinion
- ** Changes that have occurred
- ** Statement that the "opinion ... is different"
What occurs when a predecessor auditor reissues their report on the FS?
The predecessor auditor's report on the previous years' FS is published along with the report by the current year's auditor.
True / False: Predecessor auditors may reissue their report on FS as long as the report is still appropriate.
What procedures must be followed to reissue a predecessor auditor's report and who should perform these tasks?
- The predecessor auditor should...
- Read the FS for the current period and compare the audited FS with the current period FS.
- Obtain a letter of representation from the successor auditor that includes whether the s-auditor's audit revealed any matters that might have a material effect on the previous FS or require disclosure.
- Obtain a letter of representation from mgmt near the date of reissuance on whether mgmt believes there are any issues that might have a material effect on the previous FS or require disclosure.
If a precedessor auditor's report is reissued, what date is used on the reissued report?
- If the report is unrevised = use the original report date
- If the report is revised = dual date
How does the auditor handle the situation where the report of the predecessor auditor is not reissued?
- The auditor should express an opinion on the current period FS only.
- State in an Other-Matter (nonissuer) or Introductory paragraph (issuer) the following
- ** That the FS of the prior period were audited by a "predecessor auditor" (don't name)
- ** The p-auditor's opinion and, if modified, the reasons for modification
- ** The nature of any additional paragraphs included in the p-auditor's report
- ** The date of the p-auditor's report.
How does the auditor handle the situation where the predecessor auditor merely reviewed or compiled the previous FS (not audited)?
- The prior report is not reissued. The current auditor should include an Other-Matter (nonissuer) or Explanatory paragraph (issuer) that includes...
- ** the service performed in the prior period
- ** the date of the prior period report
- ** a description of any material modifications
- ** a statement that the service previously performed was less in scope than an audit
True / False: The predecessor auditor can be the current auditing firm
Define Component with regard to group financial statements
A component is an entity or business activity that prepares financial info that is included in the group
Define Component Auditor with regard to group financial statements
- An auditor who performs work on the financial info of a component that will be used as audit evidence for the group audit.
- A component auditor may be part of the group engagement partner's firm, a network firm, or another firm.
Define Group Engagement Partner (AICPA) or Principal Auditor (PCAOB).
The partner or other person in the firm who is responsible for the group audit engagement and for the auditor's report on the group FS.
As the group engagement partner, you have obtained the services of a component auditor. What aspects of the component auditor are you responsible for?
- The component auditors...
- Independence and Ethics
- Professional Competency
- Program Steps (the extent, type of info, and regulatory environment)
- *** regulatory environment = does the c-auditor operating in a regulatory environment that actively oversees auditors
True / False: When using a component auditor, the group engagement partner should always reference the component auditor in the auditor's report so as to divide responsibility.
- The group engagement partner may choose to
- (1) make no reference in the audit report and accept full responsibility for the c-auditor's work, OR
- (2) refer to the component auditor in the audit report so that the component auditor is then responsible for their own work (divide the opinion)
If the Group Engagement Partner decides to not make reference to the component auditor, which tasks should be assigned to the component auditor and which should be retained by the Group Engagement Team
- (1) A significant individual financial component should be performed by the Team
- (2) A component that is significant because it is likely to include significant risks of material misstatement can be performed by the component auditor or the Team
- (3) A component that is not significant should receive analytical procedures by the Team
If the Group Engagement Partner decides to make reference to the component auditor (divide the opinion), what requirements must be adhered to or performed?
- (1) the component auditor must have completed the audit in accordance with the relative GAAS or PCAOB requirements
- (2) the component auditor's report is not restricted use
- (3) Indicate in the Auditor's Responsibility (nonissuer) or Introductory (issuer) paragraphs --
- ** that the component was not audited by the auditor of the group statements
- ** which components were audited by a component auditor
- ** the financial reporting framework used by the component and that the auditor of the group FS is responsible for evaluating the adjustment to convert the component FS to the grup framework.
How should the auditor handle the situation where the previous year's FS were unaudited, and they are clearly marked to indicate their status?
- (1) reissue the report on the unaudited FS, OR
- (2) include a separate paragraph describing the responsibility assumed for the unaudited FS