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Unformatted text preview: CHAPTER 17 Auditors' Reports Review Questions 17-1 The three paragraphs of the standard audit report are the (1) introductory paragraph, (2) scope paragraph, and (3) opinion paragraph. 17-2 The function of notes to financial statements is to provide adequate disclosure when information in the financial statements is insufficient to attain this objective. 17-3 Auditors may issue unqualified reports when the following conditions have been met: (1) The financial statements are presented in conformity with generally accepted accounting principles, including adequate disclosure. (2) The audit was performed in accordance with generally accepted auditing standards, including no significant scope limitations preventing the auditors from gathering the evidence necessary to support their opinion. 17-4 (1) Unqualified opinionstandard report . This report represents a "clean bill of health" and may be issued when there are no material departures from generally accepted accounting principles, no significant scope limitations preventing the gathering of necessary evidence, and when no conditions requiring explanatory language exist. (2) Unqualified opinionwith explanatory language added to report . This is an audit report with an unqualified opinion, but with circumstances that result in the auditors adding certain explanatory language to the report. Examples of such circumstances are those in which other auditors have performed a portion of the audit, or when a question concerning an entitys ability to continue as a going concern exist. (3) Qualified opinion . A qualified opinion is issued when the auditors' examination is restricted as to its scope or the financial statements depart from generally accepted accounting principles. A qualified opinion is still a positive opinion; it asserts that the presentation in the financial statements, viewed as a whole, is fair. (4) Adverse opinion . This is a negative opinion, asserting that the financial statements are not a fair presentation. It is issued when the auditors' exceptions to the presentation in the 31 financial statements are so significant that a qualified opinion would be an inadequate warning to users of those statements. (5) Disclaimer of opinion . A disclaimer of opinion means that the auditors were unable to form an opinion. It is issued whenever there are such significant scope limitations that the auditors were unable to obtain sufficient evidence to form an opinion of the statements viewed as a whole, or a significant scope limitation imposed by the client. 17-5 Green should sign the report with the firm nameCary, Loeb, & Co. The report should be dated as of the last day of field work, February 20....
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- Spring '10