Beruflich Dokumente
Kultur Dokumente
Auditors Reports
McGraw-Hill/Irwin
Audit Report
Providing
an independent and expert opinion on the fairness of financial statements through an audit is the most frequent attestation service An audit provides users of financial statements reasonable assurance that the statements are in conformity with GAAP
17-2
Standard of Reporting:
The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor's report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefore in the auditor's report. In all cases where an auditor's name is associated with financial statements, the auditor should clearly indicate the character of the auditor's work, if any, and the degree of responsibility the auditor is taking, in the auditor's report.
The
Types of Reports
Reports on the financial statements ordinarily include:
Balance sheet Income statement Statement of cash flows Statement of retained earnings (equity) The notes to the financial statements are considered an integral part of the financial statements
17-4
Title includes word independent Addressed to person or audit committee who retained the auditors Signed with name of CPA firm not individual partner unless sole practitioner Dated last day of fieldwork or date on which the auditors obtained sufficient appropriate audit evidence to support their opinion
17-5
We have audited the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
17-6
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of XYZ Company as of December 31, 20XX, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
17-8
The financial statements are presented in conformity with GAAP, including adequate disclosure. The audit was performed in accordance with GAAS, and there were no significant scope limitations.
17-9
Includes the words Registered and Independent in the title. References standards of the PCAOB rather than generally accepted auditing standards. Includes the city and stateor city and country in the case of nonU.S. auditorswhere the auditors report has been issued. (Historically, auditors have included this information, although it was not required.) Includes an additional paragraph indicating that the auditors have also issued a report on the clients internal control over financial reporting.
The report on internal control may either be presented separately or combined with the report on the financial statements into one overall report
17-10
Types of Opinions
1. An unqualified opinionstandard report. This report expresses a clean opinion and may be issued only when the two conditions listed in the preceding section have been met, and when no conditions requiring explanatory language exist. 2. An unqualified opinionwith explanatory language. In certain circumstances explanatory language is added to the auditors report with no effect on the auditors opinion. 3. A qualified opinion. A qualified opinion states that the financial statements are presented fairly in conformity with generally accepted accounting principles except for the effects of some matter. 4. An adverse opinion. An adverse opinion states that the financial statements are not presented fairly in conformity with generally accepted accounting principles. 5. A disclaimer of opinion. A disclaimer of opinion means that due to a significant scope limitation, the auditors were unable to form an opinion or did not form an opinion on the financial statements.
17-11
None None
Emphasis of a matter
Justified departure from GAAP
None
None
Describe matter
Describe departure
None
None
17-12
Explanatory Paragraph
Describe departure and effects
Opinion Paragraph
except for the effects of the departure the financial statements except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to
17-13
Adverse
None
17-14
Going concern
SAS 59 Auditor not required to perform procedures specifically designed to test going-concern assumption but must evaluate the assumption Conditions Negative cash flows from operations Defaults on loan agreements Adverse financial ratios Work stoppages Legal proceedings
17-16
Explanatory Paragraphs-Consistency
As discussed in the Notes to the consolidated financial statements, effective January 1, 20X1, the Company changed its method for accounting for derivative financial instruments to conform with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. ____________________________________ As discussed in Note 15, effective January 1, 20X2, the Company changed its method of accounting for goodwill and intangible assets upon adoption of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.
17-18
Qualified Opinion
Departure from GAAP Immaterial unqualified Material qualified or adverse (if overall financial statements considered misleading) Consider effects of departure(s): Dollar magnitude of effects Significance of item to particular client Number of financial statement accounts and disclosures affected Effect on financial statements taken as a whole Consider inadequate disclosures
17-19
Qualified Opinion
Scope
limitations
Imposed by client
Client refused to allow auditors to send confirmations to customers
17-21
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding the foreign affiliate investment and earnings, the financial statements referred to above present fairly,...
17-22
Adverse
Financial
statements do not present fairly the financial position, results of operations, and cash flows of client in conformity with GAAP Very material departures from GAAP Auditor believes departure causes financial statements taken as a whole to be misleading
17-23
Adverse Opinion
In our opinion, because of the effects of the matters discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of XYZ Company as of December 31, 20X5, or the results of its operations or its cash flows for the year then ended.
17-24
Disclaimer of Opinion
Auditor
has no opinion Issued whenever unable to form an opinion as to fairness of financial statements Circumstances resulting in a disclaimer:
Substantial circumstance-imposed scope restrictions Scope restrictions imposed by the client Uncertainties
Not
Disclaimer of Opinion
We were engaged... The Company did not make a count of its physical inventory, stated in the accompanying financial statements at $_____ as of December 31, 20X2. Further, evidence supporting the cost of property and equipment acquired prior to December 31, 20X1, is no longer available. The Companys records do not permit the application of other auditing procedures to inventories or property and equipment. Since the Company did not take physical inventories and we were not able to apply other auditing procedures to satisfy ourselves as to inventory quantities and the cost of property and equipment, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on these financial statements.
17-26
17-27
17-28
Qualified by two or more Examples: Qualified because of both a scope limitation and separate departure from GAAP Wording of report would include appropriate qualifying language and explanatory paragraphs for both types of qualifications Auditor should consider cumulative effects disclaimer of opinion may be appropriate
17-29
Fourth standard: Auditor shall express an opinion on the financial statements taken as a whole
Can apply to individual financial statements It is acceptable to express an unqualified opinion on one statement while expressing a qualified or adverse on the others Example: Auditors retained after client has taken its beginning inventory. A disclaimer may be issue don the income statement (the auditor doesn't know if income is reasonably stated, but an unqualified opinion on the year-end balance sheet.
17-30
Report should cover current year as well as prior period audited by their firm. Can express different opinions on different years Auditor should update report for all prior periods presented for comparison If prior period audited by another (predecessor) CPA firm
Current year opinion only covers years the CPA firm audited For financial statements audited by predecessor auditors either: Predecessor auditor reissues report with original date or Current auditors refer to report of other auditors
17-31
Reports to SEC
Forms filed with SEC which include audited financial statements Forms S-1 through S-11 (registration statements) Forms SB-1 and SB-2 (registration for small businesses) Form 8-K (current report) Form 10-Q (quarterly report) Form 19-K (annual report) Auditors should be well versed on requirements of each form
17-32