a2l7_audit report.pdf
Post on 26-Sep-2015
269 Views
Preview:
TRANSCRIPT
-
Lecture 7
Auditors Reports
1
-
1 - 2
Learning Objective
Objectives of statutory audit
Types of Audit Reports
Conditions requiring qualified report
Other information in the audited Financial
Statements
-
1 - 3
Learning Outcomes
At the end of this session, successful students will be able to:
Describe the information that is included in an audit report.
Identify the types of audit opinions and the circumstances in which each type is appropriate.
-
Definition of Auditing
Auditing is a systematic process
of objectively obtaining and
evaluating evidence regarding
assertions about economic
actions and events to ascertain
the degree of correspondence
between the assertions and
established criteria and
communicating the results to
interested users.
Financial Statements
(including footnotes)
GAAP
Auditor's Report/
Other Reports Persons who rely on the financial reports
Creditors
Investors
Source: American Accounting Association Committee on Basic Auditing Concepts. 1973. A Statement of Basic Auditing Concepts, American Accounting Association (Sarasota, FL).
4
-
Audit Reports
Designed to promote clear communication between auditor and financial statement reader by clearly stating
What was audited and the relative responsibilities of the client and the auditor for the financial statements (introductory paragraph)
The nature of the audit process (scope paragraph)
Auditors opinion on the fair presentation of the financial statements (opinion paragraph)
If an unqualified opinion cannot be expressed, reasons why (explanatory paragraph)
5
-
Reporting on Internal Control over
Financial Reporting
Auditors report also refers to the audit of
internal control over financial reporting
6
-
Types of Audit Reports
Standard unqualified
Unqualified report with an explanatory
paragraph
Qualified
Adverse
Disclaimer
7
-
The Standard Unqualified Report
No material violations of GAAP
Disclosures are adequate
All necessary audit procedures performed (no scope
limitation)
No change in GAAP with material impact
No material weakness in internal control over
financial reporting
No going concern problems
8
-
9
-
Modifications to the Standard
Unqualified Report
Statements present fairly, but auditor wishes to
change wordings of the standard report in the
following situation:
Justified departure from GAAP
Inconsistent application of GAAP
Going-concern doubt
Emphasis of a matter
Reference to other auditors
10
-
The Qualified Report
Statements present fairly except for....
Material unjustified departure from GAAP
Inadequate disclosure
Scope limitation
11
-
The Adverse Report
Statements, as a whole, do NOT present fairly
Pervasive and material unjustified departure
from GAAP
Lack of important disclosure
12
-
The Disclaimer of Opinion
Scope limitation
Substantial doubt about the client being going
concern
13
-
Modifications Affecting the Opinion
Departure from GAAPwhether the departure is justified or unjustified, amount and pervasiveness of the misstatement, and potential impact of misstatements on statement users determines whether an unqualified, qualified, or adverse opinion is issued
Inadequate Disclosuresthe auditor should express a qualified or adverse opinion, and provide the omitted information in the audit report Explanatory paragraph should describe the nature of the
omitted disclosures, and the opinion paragraph should be modified.
14
-
Modifications Affecting the Opinion (continued)
Scope limitationimposed by client or circumstance, materiality of the amounts involved, auditors ability to form
an opinion on the statements without the evidence determines
whether qualified or disclaimer is issued
Going concerndepending on auditors assessment of clients ability to remain a going concern, auditor may issue
unqualified opinion with modified wording, qualified opinion,
or disclaim
15
-
16
-
References
(1) Arens et al. Auditing and Assurance Services: An Integrated Approach (Chapter 3 & 24)
(2) Gramlings et al. Auditing (Chapter 16)
17
top related