Homework_Wk_2 - Chapter 3 3.26 a The auditors are...

Chapter 3.
3.26 a. The auditors are responsible only to search for significant misstatements, not minor
misstatements that do not affect user’s decision. The audit cannot completely eliminate the
possibility that the material misstatement will exist in the financial statements.
b. Since financial statements are to be prepared in accordance with principles generally
accepted U.S. and the auditor has an opinion that they are in conformity, it needs to be identified
in the report.
c. The opinion paragraph is stated is an opinion rather than as a statement of absolute fact or
a guarantee. The phrase in our opinion indicates that there may be some information risk
associated with the financial statements, even though the statements have been audited.
d. The firm’s name is used (rather than individual) because the entire CPA firm has the
legal and professional responsibility to ensure that the quality of the audit meets professional
standards.
e. Financial statements must be audited in accordance with auditing standards generally
accepted in the U.S. This means that the audit is not only designed to detect material
misstatement in the financial statements, but it was performed accordingly: with adequate
training and proficiency, auditor’s independence, with proper planning and supervision and etc.
3.27 a. The following items need not be part of the auditor’s report:
- Optima is presenting comparative financial statements. The wording of the audit report
does not include the information about the comparative financial statements.
- Description of the change in method of accounting for long-term construction contracts
need not be included in the report since it is properly disclosed in the footnotes.