161_Ch_11 - CHAPTER 11 AUDITING OF GOVERNMENTAL AND...

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CHAPTER 11: AUDITING OF GOVERNMENTAL AND NOT-FOR-PROFIT ORGANIZATIONS Answers to Questions 11-1. Independent auditor's reports should provide users assurance that the statements are prepared in conformity with accounting and financial reporting standards established by authoritative bodies and generally accepted in the United States, and that all material facts are disclosed. Auditors do not insure or guarantee that the financial statements are free of errors or that all fraud was detected. 11.2. An "unqualified opinion" is the opinion that the financial statements present fairly the financial position at a certain date, changes in financial position for a period of time, and, where applicable, cash flows of the organization for the year then ended, in conformity with generally accepted accounting principles (GAAP). A governmental entity might receive a “qualified opinion” if the auditors conclude there is a departure from generally accepted accounting principles that does not materially impact whether the overall financial statements are fairly presented. For example, the government might not capitalize infrastructure assets, and yet the value of those assets (and related depreciation expense) is not material to total assets (or total expenses). Auditors may also qualify their opinion if the scope of the audit has been restricted. An “adverse opinion” is issued when the auditor believes that the overall financial statements are so materially misstated that they do not present fairly the financial position, changes in financial position, or, if applicable, the cash flows of the entity, but this opinion is rarely used. An auditor may also “disclaim an opinion” if there was a severe limitation on the scope of the audit or the auditor was not independent of the client. 11.3. GAGAS is the acronym for generally accepted government auditing standards (also referred to as GAS), the standards set forth by the Comptroller General in the "yellow book." GAAS is the acronym for generally accepted auditing standards established by the AICPA. GAAS are designed to enable an auditor to express an opinion on the financial statements. GAGAS are designed to
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  • Spring '11
  • manolo
  • Accounting, Financial audit, Auditor's report

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