Chapter 19 - Chapter 19 Audit Reports on F/S The Audit...

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Chapter 19 – Audit Reports on F/S The Audit Opinion and the Auditors’ Reporting Responsibilities When auditors perform the F/S audit, they have the responsibility to: (1) form an opinion on the F/S, and (2) issue the opinion in a written report that describes the basis of the conclusion. In order to form an opinion, auditors evaluate if the F/S are free of material error and are fairly stated and if sufficient and appropriate evidence has been collected to make that evaluation. Opinion is presented in a standard format in the audit report. If the auditors disagree with management about the F/S or were unable to carry out all the work they feel is necessary, they will modify their opinion. Then they issue a qualified opinion, an adverse opinion, or a disclaimer of an opinion. Auditors are expected to issue an unqualified opinion or explain why that is not possible. Unqualified Independent Auditor’s Report Unqualified independent auditor’s report = report a public accountant issues when all auditing conditions have been met, no significant misstatements have been discovered and left uncorrected, and the auditor believes that the F/S are fairly stated in accordance with the applicable financial reporting framework. An unqualified independent auditor’s report, referred to as the standard audit report or a “clean opinion”, is the common type of audit report. Common report because companies will make the required adjustments to the F/S and disclosures rather than receive a qualified opinion. For public companies, securities legislation requires an unqualified audit opinion. For the auditor to issue an unqualified opinion: 1. An audit engagement has been undertaken to express an opinion on F/S. 2. Auditor followed generally accepted auditing standards (GAAS). 3. Auditor was able to perform all necessary procedures. (Sufficient appropriate audit evidence has been accumulated, and the auditor has conducted the engagement in a manner that concludes that the examination standards have been met.) 4. F/S, which include the balance sheet, the income statement, the statement of retained earnings, the cash flow statement, and the notes to the F/S, are fairly stated in accordance with the applicable financial reporting framework. 5. There are no circumstances which, in the opinion of the auditor, would require modifying the wording of the report or adding an additional explanatory paragraph. Auditors may vary the wording of the standard report slightly, but the meaning will be the same. Parts of the Standard Unqualified Auditor’s Report 1. That the auditor is independent (report title) 2. The addressee – refers to the parties who have hired the auditors, or as required by law in the local jurisdiction. Addressee would be the board of directors or shareholders, but this varies depending upon the circumstances of the audit.
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  • Fall '12
  • Smith
  • Auditor's report

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