lecture_03 4240 - ACCT 4240: Auditing AuditReports:PartI...

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ACCT 4240: Auditing Audit Reports: Part I
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Reports Accompanying Financial Statements Report on financial statements and related disclosures (prepared by auditor) Are financial statements and disclosures according to GAAP? Report on internal control over financial reporting (prepared by management) Has company maintained effective internal control over financial reporting? Report on internal control over financial reporting (prepared by auditor) Is management’s assessment of its internal control appropriate? Has company maintained effective internal control over financial reporting?
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The Purpose of the Audit Report Definition of auditing: “. .. communicating results to interested users.” Indicate whether the FS are in accordance with GAAP Provide indication of what the FS would be like if GAAP were followed Provide any company-omitted disclosures Indicate any unusual aspects of the audit examination Scope limitations Division of responsibility Indicate any unusual matters related to the company Going concern uncertainty Consistency Emphasize a matter
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Four Categories of Audit Reports Standard unqualified (clean opinion) Unqualified with explanatory paragraph or modified wording Qualified Adverse or disclaimer
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Definitions: Webster’s New Unabridged Dictionary Qualified: Having met conditions or requirements set Limited, modified Unqualified: Not having the usual or requisite talents, abilities, or accomplishments Not modified, limited, or restricted by conditions or exceptions
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Types of Audit Reports Type of Report Interpretation Unqualified Opinion Financial statements taken as a whole present fairly the financial position, results of operations, and cash flows in conformity with generally accepted accounting principles (GAAP). Qualified Opinion Except for ” the effects of a particular matter, the financial statements present fairly the financial position, results of operations, and cash flows in conformity with GAAP. Adverse Opinion Financial statements do not present fairly the financial position, results of operations, and cash flows in conformity with GAAP. Disclaimer of Opinion Auditor does not express an opinion on the financial position, results of operations, or cash flows.
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Unqualified Reports
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Standard Unqualified Report The five necessary conditions have been met: 1. All four required statements are included. 2. The three general standards have been followed in all respects on the engagement. 3. Sufficient evidence has been accumulated and the auditor has conducted the engagement in a manner that enables the conclusion that the three standards of field work have been met.
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4. The financial statements are presented in accordance with GAAP (including adequate disclosures. 5. There are no circumstances requiring the
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This note was uploaded on 10/07/2011 for the course ACCOUNTING 4220 taught by Professor Brown during the Spring '11 term at UMBC.

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lecture_03 4240 - ACCT 4240: Auditing AuditReports:PartI...

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