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Unformatted text preview: tatements. This report covers ﬁnancial statements that include balance sheets
for two years and statements of income, stockholders’ equity, and cash ﬂows for
three years. The audit report presented in Exhibit 1–1 is the standard type of
unqualiﬁed audit opinion issued for publicly traded companies.
Take a moment to read through the report. You will see that the title refers to
the “Independent Registered Public Accounting Firm” issuing the audit report.
The report is addressed to the individual or group that is the intended recipient
of the report. The body of the report begins with an introductory paragraph indicating which ﬁnancial statements are covered by the report, that the statements
are the responsibility of management, and that the auditor has a responsibility
to express an opinion.
The second, or scope, paragraph communicates to the users, in very general terms, what an audit entails. In addition to indicating that the audit was
conducted in accordance with applicable auditing standards, it emphasizes the
fact that the audit provides only reasonable assurance that the ﬁnancial statements contain no material misstatements. The scope paragraph also discloses
that an audit involves an examination of evidence on a test basis (i.e., using
samples rather than examining entire populations), an assessment of accounting
principles used and signiﬁcant estimates,...
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