lecture_04 4240

lecture_04 4240 - ACCT 4240: Auditing Audit Reports Other...

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1 ACCT 4240: Auditing Audit Reports Other Than  Unqualified
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2 Three Conditions Requiring a Departure from an Unqualified Audit Report The scope of the audit has been restricted. (Auditor has not accumulated sufficient evidence to conclude whether financial statements are stated in accordance with GAAP.) Restrictions imposed by the client, for example: Unable to observe inventories. Unable to confirm material receivables.
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3 Three Conditions Requiring a Departure from an Unqualified Audit Report Circumstances beyond either the client’s or the auditor’s control Unable to observe inventories. Unable to confirm material receivables. The financial statements have not been prepared in accordance with GAAP. The auditor is not independent.
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4 Audit Reports Other than Unqualified A Qualified Opinion An Adverse Opinion A Disclaimer of Opinion
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5 Qualified Opinions The auditor must conclude that the overall financial statements are fairly presented. Qualified opinions can result from two conditions: A limitation on the scope of the audit. Failure to follow GAAP. If the auditor believes the condition being reported on is highly material, a disclaimer or an adverse report must be used. Not material  Somewhat material Very material Standard Opinion Qualified Opinion Adverse Opinion
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6 Qualified Opinions A qualified opinion is considered to be the least severe type of departure from an unqualified report. A qualified report can take the form of a qualification of both the scope and the opinion, or of the opinion alone. When a qualified report is issued, the term except for must be used in the opinion paragraph. Except for cannot be used with any other type of opinion. Explanatory paragraphs always are inserted before the opinion paragraph.
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7 Qualified Opinion—Scope Limitations Examples of scope limitations include: Failure to observe client’s ending inventories, because of client’s requests or a late appointment of the auditor by the client. Failure to confirm accounts receivable, because of client’s requests or missing or incomplete customer records. Other situations where inadequate accounting records exist.
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8 Qualified Opinion—Scope Limitations Scope Limitation Are alternative  procedures  available? Is the   restriction  a significant  limitation? Issue a qualified  opinion Perform procedures  and issue standard  report* Issue a disclaimer of  opinion * Assuming that no      departures from GAAP    are noted Yes Yes No No
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Adverse Opinion Used only when the auditor believes the overall financial statements are so materially misstated or misleading that they do not present fairly the financial position or the results of operations and cash flows in conformity with GAAP. The adverse opinion can be given only when
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This note was uploaded on 03/08/2012 for the course ACCT 4240 taught by Professor Staff during the Spring '08 term at U. Memphis.

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lecture_04 4240 - ACCT 4240: Auditing Audit Reports Other...

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