Reporting Drills

Question 1

When a nonissuer is given a qualified opinion due to a scope limitation, how is the standard audit report modified and what is the modification?

Answer 1

The Opinion paragraph wording is modified to include:
“Except for the possible effects of the matter described in the basis for qualified opinion section.”

The Basis for Opinion section is retitled Basis for Qualified Opinion and includes a detailed description of the scope limitation.

Question 2

When a nonissuer is given an adverse opinion due to a material and pervasive misstatement, how is the standard audit report modified?

Answer 2

The Opinion paragraph is modified to state:
“In our opinion, because of the significance of the matter described in the Basis for Adverse Opinion section, the financial statements do not present fairly…”

The Basis for Opinion section is retitled Basis for Adverse Opinion and includes a description of the material misstatement causing the adverse opinion.

Question 3

When a nonissuer issues a disclaimer of opinion due to a scope limitation that is both material and pervasive, how is the standard audit report modified?

Answer 3

The Opinion paragraph is replaced with a Disclaimer of Opinion paragraph stating:
“Because of the significance of the matter(s) described in the Basis for Disclaimer of Opinion section, we do not express an opinion on the financial statements.”

The Basis for Opinion section is retitled Basis for Disclaimer of Opinion and describes the scope limitation causing the disclaimer.

The Auditor’s Responsibilities for the Audit of the Financial Statements section is modified to remove references to obtaining sufficient appropriate audit evidence and the auditor’s opinion.

Question 4

When a nonissuer issues a qualified opinion due to a material misstatement (not a scope limitation), how is the standard audit report modified?

Answer 4

The Opinion paragraph is modified to include:
“Except for the effects of the matter(s) described in the Basis for Qualified Opinion section, the financial statements present fairly…”

The Basis for Opinion section is retitled Basis for Qualified Opinion and describes the material misstatement causing the qualification.

Question 5

When an issuer is given a qualified opinion due to a material misstatement, how is the standard audit report modified?

Answer 5

The Opinion paragraph is modified to include:
“In our opinion, except for the effects of the matter(s) described in the Basis for Qualified Opinion section, the financial statements present fairly…”

The Basis for Opinion section includes a detailed description of the material misstatement.

Question 6

When an issuer is given an adverse opinion due to a material and pervasive misstatement, how is the standard audit report modified?

Answer 6

The Opinion paragraph is modified to state:
“In our opinion, because of the significance of the matter(s) described in the Basis for Adverse Opinion section, the financial statements do not present fairly…”

The Basis for Opinion section includes a detailed description of the 1) issue and 2) effect on FS

An additional paragraph is added immediately after the Opinion paragraph describing the reasons for the adverse opinion (this paragraph has no heading).

Question 7

When an issuer issues a disclaimer of opinion due to a material and pervasive scope limitation, how is the standard audit report modified?

Answer 7

The Opinion paragraph is replaced with a Disclaimer of Opinion paragraph stating:
“Because of the significance of the matter(s) described in the Basis for Disclaimer of Opinion section, we do not express an opinion on the financial statements.”

The Basis for Opinion section is retitled Basis for Disclaimer of Opinion and includes a detailed description of the scope limitation.

The Auditor’s Responsibilities section is modified to state the auditor was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Question 8

When an issuer issues a qualified opinion due to a scope limitation, how is the standard audit report modified?

Answer 8

The Opinion paragraph is modified to include:
“In our opinion, except for the possible effects of the matter(s) described in the Basis for Qualified Opinion section, the financial statements present fairly…”

The Basis for Opinion section is retitled Basis for Qualified Opinion and includes a detailed description of the scope limitation.

Question 9

What are the 4 required sections of an Unmodified audit opinion report (OBAM)?

Answer 9

O - Opinion (Must be first)
B - Basis for Opinion (Must be second)
A - Auditor’s responsibilities for the Audit of the FS
M - Management’s responsibilities for the FS

Question 10

What 4 items must be included in the audit report for each Critical Audit Matter (ICDR)?

Answer 10

I - IDENTIFIICATION of the CAM
C - CONSIDERATIONS that determined that the matter was a CAM
D - DESCRIPTION of how the CAM was addressed in the audit
R - REFERENCE to relevant FS accounts or disclosures

Question 11

In a nonissuer’s audit report, where does the company’s accounting framework (ie GAAP) show up?

Answer 11

1. Management’s Responsibility section — management states they are responsible for preparing the financial statements in accordance with GAAP.
2. Opinion section — the auditor expresses an opinion on whether the financial statements conform with GAAP.

Question 12

In a issuer’s audit report, where does the company’s accounting framework (ie GAAP) show up?

Answer 12

Opinion section

The auditor’s opinion explicitly says the financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework (GAAP). This identifies the basis for the auditor’s opinion.

Question 13

What is the flow of the audit report through the five key reporting dates:

Answer 13

Balance Sheet Date → Audit Report Date → Report Release Date → Documentation Completion Date → Issuance Date

Question 14

What is the Balance Sheet Date (Fiscal Year-End Date)?

Answer 14

The date the company closes its books for the period under audit. Audit procedures focus on transactions and balances up to this date.

Question 15

What is the Audit Report Date?

Answer 15

The date when the auditor has obtained sufficient appropriate audit evidence to support their opinion.

Notes:
- It marks the completion of audit fieldwork and the auditor’s responsibility for events up to that date.
- This date appears on the audit report itself.
- After this date, the auditor’s active responsibility to search for subsequent events ends, but if new info arises that existed before this date, the auditor may need to update the report.

Question 16

What is the Report Release Date?

Answer 16

The date the auditor grants the client permission to use the audit report.

Notes:
- Often, this is the date the report is delivered to the client.
- This date starts the clock for document retention and completion deadlines.

NOTE THAT THIS IS NOT THE DATE WHERE DELETIONS TO THE FILE CANNOT BE MADE - THAT’S THE DOCUMENT COMPLETION DATE

Question 17

What is the Documentation Completion Date? When is this required to happen in relation to the Report Release Date?

Answer 17

The administrative deadline by which the auditor must finalize, organize, and complete the audit file.

Notes:
- After this date, existing documentation must not be deleted, and any additions must be clearly documented.
- For nonissuers, typically 60 days after the report release date; for issuers, 14 days.
- This is an administrative deadline, not related to performing new audit procedures.

THIS IS NOT THE DATE THAT THE RETENTION PERIOD STARTS - THATS THE REPORT RELEASE DATE

Question 18

What is the Issuance Date?

Answer 18

The date the financial statements (with the audit report) are issued to users or filed with regulators. This can be the same as or after the report release date.