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Unformatted text preview: tential areas of concern.
Auditors can then use the information from the various analyses
and conduct further audit procedures to determine whether a fraud
has occurred. 2. How might ACL be used by a company to comply with the
requirements related to internal control over financial reporting?
Hint: Take a look at ACL’s Continuous Controls Monitoring (CCM)
ACL’s CCM software provides an independent mechanism to
automatically monitor internal controls effectiveness within key
business processes. Also, CCM uses analytics and embedded
audit "best practices" in business operations so that management
receives timely notification of unusual patterns and control breaches .
According to ACL, the benefits of CCM include:
Independent testing of controls through transaction analysis
at the source level
Timely notification to management of controls breakdowns
enabling control weaknesses to be fixed before they are
Fraud reduction and improved risk management through
identification of control gaps and weaknesses that can lead
to error, abuse and fraud 9-28 Internet Problem 7-1 (continued)
• Improvements to operational efficiency and effectiveness
Extensibility to multiple end-to-end business processes
with independent assurance of controls effectiveness and
transaction integrity across the enterprise (Note: Internet problems address current issues using Internet sources. Because
Internet sites are subject to change, Internet problems and solutions may change. Current
information on Internet problems is available at www.pearsonglobaleditions.com/arens.) Chapter 3
Audit Reports Review Questions 3-1
Auditor's reports are important to users of financial statements because they
inform users of the auditor's opinion as to whether or not the statements are fairly stated
or whether no conclusion can be made with regard to the fairness of their presentation.
Users especially look for any deviation from the wording of the standard unqualified
report and the reasons and implications of such deviations. Having standard wording
improves communications for the benefit of users of the auditor’s report. When there are
departures from the standard wording, users are more likely to recognize and consider
situations requiring a modification or qualification to the auditor’s report or opinion.
3-2 The unqualified audit report consists of:
5. Report title Auditing standards require that the report be titled and that the
title includes the word independent.
Audit report address The report is usually addressed to the company, its
stockholders, or the board of directors.
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.
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.
Opinion paragraph . The final paragraph in the standard report states
the auditor's conclusions based on the results of the audit. 9-29 6.
7. Name of CPA firm. The name identifies the CPA firm or practitioner who
performed the audit.
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
The purposes of the scope paragraph in the auditor's report are to inform the
financial statement users that the audit was conducted in accordance with generally
accepted auditing standards, in general terms what those standards mean, and whether the
audit provides a reasonable basis for an opinion.
The information in the scope paragraph includes:
1. The auditor followed generally accepted auditing standards.
2. The audit is designed to obtain reasonable assurance about whether the
statements are free of material misstatement.
3. Discussion of the audit evidence accumulated.
4. Statement that the auditor believes the evidence accumulated was appropriate
for the circumstances to express the opinion presented.
The purpose of the opinion paragraph is to state the auditor's conclusions based
upon the results of the audit evidence. The most important information in the opinion
1. The words "in our opinion" which indicate that the conclusions are based on
2. A restatement of the financial statements that have been audited and the dates
thereof or a reference to the introductory paragraph.
3. A statement about whether the financial st...
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- Fall '13