Chapter 17 - Audit Reports

Question 1

Audit Reports on the Financial Statement are on?

Answer 1

B/S, I/S, C/F, Stmt of RE, and Footnotes

Question 2

Audit Report for both Public and Private Companies include what main sections?

Answer 2

1. Under what Basis the Audit- -Performed under (PCAOB or SAS)
2. Opinion Section
3. CAM or KAM Section

Question 3

What are CAM’s disclosures in the audit report for Public Companies?

Answer 3

For public Companies they are material matters associated with the financial statements that the auditors found to be especially challenging, subjective, or complex auditor judgement was involved.

Question 4

What is does an unqualified opinion for an audit report mean?

Answer 4

Issued when the financial statements present fairly the financial position, results of operations, and cash flows are in conformity with GAAP.

Question 5

What does a disclaimer of an audit opinion mean?

Answer 5

Issued when there are missing information over material areas that the auditor cannot express an opinion on the F/S.

Question 6

What audit opinion would be issued by an auditor if there is a material misstatement, but it is not pervasive?

Answer 6

Qualified with an except for section in the audit opinion.

Question 7

Should a going concern issue be present with a company, would that be mentioned in the auditor’s opinion?

Answer 7

Ordinarily an unmodified opinion with an additional “going concern paragraph” is issued. Alternatively, a disclaimer of opinion may be issued.

Question 8

If there is a correction of an error by the company from previously issued financial statements. Does that require the auditor to modify his prior opinion?

Answer 8

No, but in the current period, an additional section would include a statement that the previously issued financial statements have been restated for correction of a material misstatement and a reference to the entity’s disclosure of the correction in the notes to the financial statements.

Question 9

If a company is going public for the first time, what SEC filling for the financial statements prior to going public be required?

Answer 9

S-1 (Registration Statement)

Question 10

Does the auditor have to agree with the Company on a change in accounting principle?

Answer 10

Yes. In auditing and accepting the change, the auditors should evaluate whether.
The newly adopted principle is generally accepted.
The method of accounting for the effect of the change is in conformity with generally accepted accounting principles.
The disclosures related to the change are adequate.
Management has justified that the new accounting principle is preferable.