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Chapter_18 Audit Reports - ACCY 360/560 Assurance...

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ACCY 360/560: Assurance Services "Audit Reports" Chapter #18 I. Recall the Standards of Reporting of GAAS (“GCDO”) that affect the auditor’s reporting language II. Standard “unqualified” report (see the sample reports: one in paragraph form & the other by sentences) means that the financial statements are fairly stated, without reservation III. Unqualified, but modified reports means that the financial statements are fairly stated, without reservation (but the auditor deviates from the usual “standard” unqualified report as deemed appropriate, perhaps to emphasize a matter of importance) A. Limited reporting engagement (when engaged to report on 1 basic F/S; e.g., just the B/S) 1. Note that the reference in the fourth reporting standard to the F/S taken as a whole applies to an individual F/S as well as to the complete set of current year’s F/S 2. If reporting on only one F/S – the audit report specifies the F/S involved B. Report based in part on other auditors – to convey a division of responsibility 1. Not required to make reference to other auditors a. Procedures--inquire about the other auditors' professional reputation; and obtain their representation as to independence (may request to review their audit programs & W/Ps, too) b. Reporting--if principal auditor decides to mention other auditors, usually identify proportion of F/S audited by others (usually do not mention other auditors by name) 2. Reference to other auditors affects each paragraph C. Uncertainties (including "going concern") -- when the outcome of F/S-related uncertainties is not susceptible to reasonable estimation, but F/S treatment is apparently in accordance with GAAP D. Unusual circumstances requiring departure from promulgated GAAP --note that there is a strong presumption that following FASB statements, etc., will not make the F/S misleading!
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2 E. Inconsistency in application of GAAP --refer to change in principles in an explanatory paragraph (after the opinion paragraph) F. Omitted quarterly data for SEC reporting companies -- if quarterly data required under Regulation S-K is omitted, add explanatory paragraph noting that fact G. Supplementary information required by FASB or GASB -- past examples are effects of changing prices (inflation); oil & gas reserves; and mineral reserves 1. Not required to audit "supplemental information"--inquire of client (how measured, guidelines applied, consistency with prior year, assumptions) 2. Reporting issues--since outside the scope of the audit, add an explanatory paragraph if necessary a. Required supplementary information omitted--just point out the omission b. Information departs from applicable FASB/GASB guidelines--just describe the departure(s) ... H. Other information in document containing audited F/S -- (especially related to management's discussion & analysis, “MD&A” ) 1. Outside the scope of the audit – therefore can't affect the opinion 2. Read the other information & consider whether it is inconsistent with the audited F/S – may have to add an explanatory paragraph if the client refuses
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