AUD 1.03 - Forming an Audit Opinion

  1. What are the 4 types of opinions that an auditor may issue?
    • Unqualified or Unmodified
    • Qualified
    • Adverse
    • Disclaimer
  2. When should the auditor consider withdrawing from the engagement
    When the financial statements are clearly false, fraudulent, deceptive, or misleading
  3. What is the difference between an unqualified versus an unmodified opinion?
    • Unqualified is used for issuers
    • Unmodified is used for non-issuers
  4. Define an unqualified (unmodified) opinion
    The financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework.
  5. True / False: An auditor can issue an unqualified (unmodified) opinion yet reports certain compelling circumstances.
    True
  6. How does an auditor report a compelling circumstance when issuing an unqualified (unmodified) opinion?
    • For issuers, they write explanatory paragraphs.
    • For non-issuers, they write either emphasis-of-matter, or other-matter paragraphs.
  7. What two circumstances require that an auditor issue an opinion other than unqualified (unmodified)?
    • (1) When the auditor concludes that the financial statements as a whole are materially misstated, OR
    • (2) When the auditor is unable to obtain sufficient appropriate audit evidence to form a conclusion
  8. Define a qualified opinion; when is this issued?
    • When the issue is material, but not pervasive.
    • The financial statements are presented fairly, in all material respects, and in conformance with the applicable reporting framework, except for the effects of the matter(s) to which the qualification relates.
  9. Define an adverse opinion; when is this issued?
    • When the issue is material and pervasive
    • The financial statements do not present fairly the financial position of the entity, or are not in conformity with the applicable financial reporting framework.
  10. Define a disclaimer of opinion; when is this issued?
    • When the issue is material and pervasive.
    • The auditor does not express an opinion on the financial statements.
  11. True / False: An auditor may issue an adverse opinion, or disclaimer of opinion, on a portion of the financial statements, but an unqualified (unmodified) opinion on other portions.
    • False
    • It's considered a "piecemeal" opinion
    • If any portion of the financial statements warrants an adverse or disclaimer of opinion, that opinion applies to the entire audit.
  12. Define pervasive
    • In the auditor's professional judgment, the issue is not confined to a specific element, account, or financial statement, but
    • If confined (such as to one statement) the issue represents a substantial portion of the statement, OR
    • The opinion offers disclosures fundamental to the users' understanding of the financial statements.
  13. Which types of opinions are offered on the financial statements? (Adherence to GAAP)
    • Unqualified (unmodified)
    • Qualified
    • Adverse
  14. Which types of opinions are offered based on the ability of the auditor to perform the audit? (Adherence to GAAS)
    • Unqualified (unmodified)
    • Qualified
    • Disclaimer of Opinion
  15. What types of items should the auditor consider when forming an opinion based on the applicable financial reporting framework
    • FINANCIAL STATEMENTS
    • ** The accting policies are consistent with the framework
    • ** The info in the FS is relevant, reliable, comparable, and understandable
    • ** The content is fairly presented and represent the underlying transactions
    • ** Estimates used by mgmt are reasonable
    • DISCLOSURES
    • ** Describe the applicable financial reporting framework
    • ** Are adequate to enable the intended users to understand the effects of material transactions
    • ** Terminology used is appropriate
    • ** Represent the underlying transactions
  16. True / False: Departure from GAAP is permissible if the FS would be otherwise misleading.
    • True
    • An unmodified/unqualified opinion can be offered
    • It must be disclosed in the notes and explained adequately.
  17. Does the receipt of an unqualified/unmodified opinion equate to a good investment?
    No - the unqualified opinion means the FS accurately portray what the entity is doing -- even if what they are doing stinks.
Author
BethM
ID
332007
Card Set
AUD 1.03 - Forming an Audit Opinion
Description
Becker Review 2017
Updated