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What are the 10 components of the unmodified audit opinion report (in order)? [The contents of each section are separate flashcards]
- (1) Title
- (2) Addressee
- (3) Introductory Paragraph
- (4) Management's Responsibility
- (5) Auditor's Responsibility
- (6) Auditor's Opinion
- (7) Other Reporting Responsibilities
- (8) Signature of the Auditor
- (9) Auditor's Address
- (10) Date of the Auditor's Report
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What content is contained in the Title section of the unmodified audit opinion report? Is this section included in an unqualified report?
- "Independent" auditor's report
- Yes
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What content is contained in the Addressee section of the unmodified audit opinion report? Is this section included in an unqualified report?
- This depends on the circumstances of the engagement, but typically not management
- Yes, but is typically addressed to the company, the stockholders, and/or the board of directors
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What content is contained in the Introductory Paragraph section of the unmodified audit opinion report? Is this section included in an unqualified report?
- Yes, this section is included in an unqualified report, but the content is different. Following is the unmodified content.
- May contain a heading "Report on the Financial Statements" if a section titled "Report on Other Legal and Regulatory Requirements" is included in the audit report.
- Identify the entity whose FS have been audited
- State that the FS have been audited
- Identify the title and specify the date(s) or period(s) of each FS and the related notes
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What content is contained in the Introductory section of the unqualified audit opinion report? Is this section included in an unmodified report?
- Yes, but the content is different for an unmodified report. Following is the unqualified content.
- No heading is used
- The FS as identified in the report were audited.
- The FS are the responsibility of mgmt, and that the auditor's responsibility is to express an opinion.
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What content is contained in the Management's Responsibility section of the unmodified audit opinion report? Is this section included in an unqualified report?
- No, this section is not in the unqualified report.
- Heading "Management's Responsibility for the Financial Statements"
- Explanation that mgmt is responsible for the preparation and fair presentation of the FS in accordance with the applicable financial reporting framework
- Management is responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of FS that are free from material misstatement, whether due to fraud or error
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What content is contained in the Auditor's Responsibility section of the unmodified audit opinion report? Is this section included in an unqualified report?
- No, this section is not in the unqualified report.
- The auditor is to express an opinion on the FS based on the audit
- The audit was conducted in accordance with GAAS in the US. If more than one std was used, state both standards (GAAS and ISA, or GAAS and GAGAS). On occasion a private company (nonissuer) is required due to loan requirements to comply with PCAOB stds.
- GAAP requires that the auditor plan and perform the audit to obtain reasonable assurance about whether the FS are free from material misstatement
- A description of the audit process (details on separate card)
- A statement about whether the auditor believes that the audit evidence is sufficient and appropriate to provide a basis for the opinion.
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What content is contained in the audit process portion of the Auditor's Responsibility section?
- An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the FS
- The procedures selected depend on the auditor's judgment regarding the risks of material misstatement
- The auditor considers internal control when assessing risk regarding the material misstatement of the FS, (the next portion is omitted if the auditor actually does assess internal control) but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.
- The audit includes evaluating the appropriateness of the accting policies used and the reasonableness of significant accting estimates by mgmt, as well as the overall FS presentation.
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What content is contained in the Auditor's Opinion section of the unmodified audit opinion report? Is this section included in an unqualified report?
- Yes, but the unqualified opinion repeats the list of FS identified in the Introductory paragraph and no heading is used.
- Heading "Opinion"
- The FS present fairly, in all material respects, the financial position of the entity as of the balance sheet date and the results of operations and its cash flows for the period then ended, in accordance with the applicable financial reporting framework.
- Identify the framework and its origin (such as GAAP, USA).
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What content is contained in the Date of the Auditor's Report section of the unmodified audit opinion report?
- This is the most recent & final date of auditor responsibility.
- There may be dual dating (see AUD 1 - Subsequent Events)
- No earlier than the date on which the auditor has obtained sufficient and appropriate audit evidence on which to base the auditor's opinion, including review of the audit documentation.
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Tricky questions: What section of the audit report contains references to GAAS, or GAAP
- GAAS: Auditor's Responsibility
- GAAP: Management's responsibility and Opinion sections
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What are the 8 components of the unqualified audit opinion report (in order)? [The contents of each section are separate flashcards]
- (1) Title
- (2) Addressee
- (3) Introductory Paragraph
- (4) Scope Paragraph
- (5) Opinion Paragraph
- (6) Firm Name
- (7) Firm's Address
- (8) Report Date
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What content is contained in the Scope section of the unqualified audit opinion report? Is this section included in an unmodified report?
- No, this isn't in the unmodified report
- The audit was conducted in accordance with the standards of the PCAOB (US)
- The audit was planned and performed to obtain reasonable assurance that the financial statements are free from material misstatement.
- The audit included examining evidence on a test basis; assessing the accting principles used and significant estimates made by management
- The audit provides a reasonable basis for an opinion
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An issuer must file a specific form with the PCAOB following each audit. What is this form and its contents?
- Form AP (audit participants)
- Name of the firm
- The city & state of the firm
- Name of the issuer
- Date of the audit report
- The date(s) of the most recent period's FS identified in the audit report
- Whether the audit report is dual-dated
- Whether other accting firms participated in the audit
- Whether the firm divided responsibility for the audit
- Signature of partner or authorized officer
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What is the due date for Form AP
- The 35th day after the audit report is first filed in a document with the SEC, OR
- Within 10 days if the audit report is included in a registration statement
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Assume your firm contracts with another firm to perform a portion of the audit. How is the contracted firm treated?
- Just like your own staff.
- You must ensure their reputation, independence, and professional competencies are appropriate
- You must ensure the other firm complies with all audit standards and program steps
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An issuer users FIFO for its international subsidiary's inventory, but LIFO for its domestic inventory. Assuming no other issues, what type of opinion should the auditor express?
- Unmodified
- GAAP allows a company to use different methods for costing different inventories as long as the methods are disclosed.
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