Chapter 3 - Chapter 3 Audit Reports Review Questions 3 2...

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1 Chapter 3 Audit Reports Review Questions 3-2 The unqualified audit report consists of: 1. Report title: Auditing standards require that the report be titled and that the title includes the word independent . 2. Audit report address: The report is usually addressed to the company, its stockholders, or the board of directors. 3. Introductory paragraph: The first paragraph of the report does three things: first, it makes the simple statement that the CPA firm has done an audit . Second, it lists the financial statements that were audited, including the balance sheet dates and the accounting periods for the income statement and statement of cash flows. Third, it states that the statements are the responsibility of management and that the auditor's responsibility is to express an opinion on the statements based on an audit. 4. Scope paragraph : The scope paragraph is a factual statement about what the auditor did in the audit. The remainder briefly describes important aspects of an audit. 5. Opinion paragraph: The final paragraph in the standard report states the auditor's conclusions based on the results of the audit. 6. Name of CPA firm : The name identifies the CPA firm or practitioner who performed the audit. 7. Audit report date : The appropriate date for the report is the end of fieldwork, when the auditor has gathered sufficient appropriate evidence to support the opinion. The same seven parts are found in a qualified report as in an unqualified report. There are also often one or more additional paragraphs explaining reasons for the qualifications. 3-3 The purposes of the scope paragraph in the auditor's report are to inform the financial statement users that the audit was conducted in accordance with generally accepted auditing standards, in general terms what those standards mean, and whether the audit provides a reasonable basis for an opinion. The information in the scope paragraph includes: 1. The auditor followed generally accepted auditing standards. 2. The audit is designed to obtain reasonable assurance about whether the statements are free of material misstatement. 3. Discussion of the audit evidence accumulated. 4. Statement that the auditor believes the evidence accumulated was appropriate for the circumstances to express the opinion presented. 3-4 The purpose of the opinion paragraph is to state the auditor's conclusions based upon the results of the audit evidence. The most important information in the opinion paragraph includes: 1. The words "in our opinion" which indicate that the conclusions are based on professional judgment. 2. A restatement of the financial statements that have been audited and the dates thereof or a reference to the introductory paragraph. 3.
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This note was uploaded on 03/23/2011 for the course ACC 123 taught by Professor W during the Spring '11 term at Prince George's Community College, Largo.

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Chapter 3 - Chapter 3 Audit Reports Review Questions 3 2...

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