What are the 4 types of opinions that an auditor may issue?
Unqualified or Unmodified
When should the auditor consider withdrawing from the engagement
When the financial statements are clearly false, fraudulent, deceptive, or misleading
What is the difference between an unqualified versus an unmodified opinion?
Unqualified is used for issuers
Unmodified is used for non-issuers
Define an unqualified (unmodified) opinion
The financial statements are presented fairly, in allmaterial respects, in conformity with the applicable financial reporting framework.
True / False: An auditor can issue an unqualified (unmodified) opinion yet reports certain compelling circumstances.
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.
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
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.
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.
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.
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.
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.
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.
Which types of opinions are offered on the financial statements? (Adherence to GAAP)
Which types of opinions are offered based on the ability of the auditor to perform the audit? (Adherence to GAAS)
Disclaimer of Opinion
What types of items should the auditor consider when forming an opinion based on the applicable financial reporting framework
** 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
** 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
True / False: Departure from GAAP is permissible if the FS would be otherwise misleading.
An unmodified/unqualified opinion can be offered
It must be disclosed in the notes and explained adequately.
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.