Chapter 12 - Chapter 12 Reports on Audited Financial...

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Chapter 12 Reports on Audited Financial Statements The television industry doesn’t like to see the complexity of the world. It prefers simple reporting, with simple ideas: this is white, that’s black; this is good, that’s bad. Filmmaker Krisztof Kieslowski
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Chapter 12 Objectives 1. Provide an overview of the types of reports that accompany an entity's financial statements. 2. List three general functions of the auditors’ report on an entity’s financial statements. 3. Explain the significance of each of the paragraphs in the auditors’ standard report on an entity’s financial statements. 4. Describe the types of auditors’ reports that may be issued if an entity’s financial statements contain a departure from GAAP. 12-2
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Chapter 12 Objectives 1. Describe the types of auditors’ reports that may be issued if auditors are unable to comply with GAAS. 2. Describe how the standard report is modified when auditors issue unqualified opinions but reference other matters affecting the audit or the client. 3. Identify other circumstances affecting auditors’ reporting responsibilities and explain how they affect auditors’ reports on an entity’s financial statements. 12-3
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Reports Accompanying Financial Statements Prepared by Auditor Opinion on financial statements and related disclosures: Are they presented per GAAP? Opinion on internal control over financial reporting: Is it effective? Prepared by Management Opinion on internal control over financial reporting: Is it effective? 12-4
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The Purpose of the Auditors’ Report Are F/S in conformity with GAAP? Provide indication of what the F/S would be like if GAAP were followed Provide any entity-omitted disclosures Any unusual aspects of the audit examination? Scope limitations Division of responsibility Any unusual matters related to the entity? Going-concern uncertainty Consistency Emphasis of a matter 12-5
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Types of Auditors’ Reports Standard report Expresses an unqualified opinion Unqualified opinion with modified wording F/S are in conformity with GAAP Difference between this and standard report is that additional matters are disclosed in report Qualified opinion “Except for” some matter, F/S are in conformity with GAAP Adverse opinion F/S are not in conformity with GAAP Disclaimer of opinion No opinion is issued by auditors 12-6
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The Standard Report (Paragraphs) Introductory F/S and years examined Responsibility of auditors and management Scope Audit conducted in accordance with PCAOB standards Description of an audit (specific references to “ test basis ,” materiality ,” and “ significant estimates ”) Audit provides reasonable assurance Opinion Are F/S presented in conformity with GAAP?
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