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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:
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.
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.
in the Les Meridian
Auditor’s Report b.
in Les Meridian
Auditor’s Report The report is titled
1. Report title Auditing
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
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
specifically notes that the
financial statements are prepared
The third paragraph
in accordance with IFRS, and it
describes the auditor’s
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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.
- Fall '13