Chapter 3 - Chapter 3 Audit Reports Note to students: This...

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1 Chapter 3 Audit Reports Note to students : This is probably the most important chapter among all auditing topics. I have attached three-page worth of acronyms at the end of the outline. Please print those memory sheets separately. Understand the whole audit process, and memorize all the details involved in audit reports. Audit Opinions: SQUAD S S tandard unqualified Q Q ualified U U nqualified/WITHs A A dverse D D isclaimer There are three things in reporting you must have memorized 1. Unqualified opinion often called the standard report 2. Modified opinions - qualified, adverse and disclaimers 3. Unqualified/WITHs are heavily tested on the CPA exam. Most of the situations involve a separate explanatory paragraph; a few are just a change in wording. One thing you MUST KNOW is where the separate explanatory paragraph goes in relationship to the opinion paragraph. 1. Standard Unqualified Audit Report – Figure 3-1 Your Task : Memorize and understand the seven parts of a standard unqualified audit report. The seven parts in a standard audit report (TAI SO N augh T y ) T T itle of the report A A ddress I I ntroductory paragraph S S cope paragraph O O pinion paragraph N N ame of the CPA firm T T ime of the report Review Question 3-2, 3-5, 3-6, Problem 3-26, 3-27 a. Among the aforementioned seven parts, major body of the report is: Introductory paragraph – Factual Statement Your Task : Memorize and understand the following acronym for the introductory paragraph: Introductory paragraph (ASMA) a. We have A UDITED b. Client’s financial S TATEMENTS (statements listed) c. Financial statements are the responsibility of M ANAGEMENT d. The A UDITOR’S responsibility is to express an opinion (1) States that __________________________________________________ (2) List financial statements ( ___________________________, _________________________, _________________________) being audited. (3) States the division of responsibilities between the management and the auditor.
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2 Scope Paragraph Factual Statement Your Task : Memorize and understand the following acronym for the score paragraph Scope paragraph (GRAB) a. Audit conducted in accordance with G AAS in the USA b. GAAS requires that we plan and perform the audit to provide R EASONABLE assurance that financial statements are free of material misstatement c. A UDIT involves - (TAPE) 1. Examining, on a T EST basis, evidence supporting amounts and disclosures 2. Assessment of A CCOUNTING principles 3. Evaluation of overall P RESENTATION 4. Assessment of significant E STIMATES d. Audit provides reasonable B ASIS for opinion Use GRABTAPE for Scope Paragraph : G R T APE B (1) States that the auditor followed ______________________ (private firms) and ___________________________ (public firms) auditing standards. (2) States that the auditor is designed to obtain
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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 Note to students: This...

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