Yes 3 an accounting change involving a change in the

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Unformatted text preview: nerally accepted accounting principle to another generally accepted accounting principle. Yes 6 An accounting change involving a change in an accounting estimate. No 7 Not an accounting change but rather a change in classification. No 8 An accounting change from one generally accepted accounting principle to another generally accepted accounting principle. Yes 3-32 Deficiencies in the staff accountant's tentative report include the following: 1. 2. 3. Report title must include the word “independent.” The report should generally be addressed to the board of directors or stockholders, not to the audit committee. The introductory paragraph should state, "we have audited," not "we have examined." 9-43 3-32 (continued) 4. 5. 6. When the principal auditor decides to make reference to the audit of another auditor, the report should indicate clearly in the introductory paragraph the division of responsibility regarding the portions of the financial statements audited by each. Also, the opinion paragraph should state that the opinion is based in part on the reports of other auditors. Neither of these was done. When the principal auditor decides to make reference to the audit of the other auditor, the report should disclose the dollar amounts or percentages of the portion of the financial statements audited by the other auditor. This was not done. The second paragraph is an inappropriately worded scope paragraph. It should be stated as follows: We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. 7. 8. 9. 10. Although the introductory paragraph referred to an audit of the financial statements for the years ended December 31, 2009 and 2008, an opinion w as expressed only on the 2009 financial statements. The statement of cash flows was not identified in the opinion paragraph, and financial statements were not referred to in the opinion paragraph as "consolidated." The explanatory sentence for consistency should follow the opinion paragraph, not precede it. Also, the second sentence in the third paragraph should be omitted. There is no inclusion of the phrase, "in all material respects" in the opinion paragraph. 9-44 3-33 The table presented below describes the seven distinct parts of the standard unqualified report and describes both similarities (part a.) and differences (part of b.) between the standard audit report and the audit report on the Les Meridian, Inc. financial statements. Seven Distinct Parts of Standard Audit Report a. Description of Similar Elements in the Les Meridian Auditor’s Report b. Different Elements in Les Meridian Auditor’s Report The report is titled 1. Report title Auditing “Independent Auditor’s standards require that the report be titled and that the Report. title includes the word independent. 2. Audit report address The report is usually addressed to the company, its stockholders, or the board of directors. The report is addressed to the Shareholders of Les Meridian, Inc. 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. The report begins with the The introductory paragraph also statement that the CPA firm references the summary of significant accounting principles has done an audit. and other explanatory reports as The introductory paragraph being a part of the scope of the lists the financial statements audit. A similar reference is not audited, including the time included in the U.S. standard period of those statements. audit report. The second paragraph states The discussion of management’s responsibility for the financial that management is statements contained in the responsible for the second paragraph is more preparation and fair presentation of the financial extensive than the discussion in the standard audit report. It statements. specifically notes that the financial statements are prepared The third paragraph in accordance with IFRS, and it describes the auditor’s r...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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