Chapter_3_answers_to_review_questions - 3-2 Review...

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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. 3-15 The common definition of materiality as it applies to accounting and, therefore, to audit reporting is: A misstatement in the financial statements can be considered material if knowledge of the misstatement would affect a decision of a reasonable user of the statements. Conditions that affect the auditor's determination of materiality include: Potential users of the financial statements Dollar amounts of the following items: net income before taxes, total assets, current assets, current liabilities, and owners' equity
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This note was uploaded on 02/19/2012 for the course ACCOUNTING 320 taught by Professor Rich during the Fall '12 term at Columbia College.

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Chapter_3_answers_to_review_questions - 3-2 Review...

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