Close information not specified in authoritative

This preview shows page 11 - 13 out of 35 pages.

close information not specified in authoritative support sources, for instance, if there is an unusual fact situation not encountered before. Using this standard, auditors have lati- tude to determine what is important and what is not. Likewise, users of fi nancial state- ments also have the right to claim that certain information is necessary for adequate disclosure. In fact, many lawsuits are brought forward on this issue, and auditors must show reasons for the lack of disclosure. As noted in Chapter 1, disclosures are an impor- tant means of dealing with accounting risk and a significant aspect of auditor professional judgment, as many aspects of implementing accounting and auditing standards are not covered by them. When auditors believe that certain information is necessary for adequate disclosure but the company refuses to disclose it, a departure from GAAP exists. Usually, a qualified opinion is written, and the reason for the departure (missing disclosure) is described in the audit report. Sometimes the missing disclosure is added to the audit report itself. Report Content The reporting standard of CAS 700 and 705 states the requirements for an opinion. Two types of modifications to the report are relevant: those that affect the audit opinion and those that do not. In this section we provide an overview of matters that affect the audit opinion. Chapter 3 provides more details on these and other modifications.
Image of page 11

Subscribe to view the full document.

40 PART I Introduction to Auditing, Public Practice, and Professional Responsibilities CAS 700 provides guidance for the standard audit report, while CAS 705 provides guidance on reservations in the auditor’s report and requires that the report must contain either the opinion on the financial statements or an assertion that an opinion cannot be given. This means that there are two classes of opinion statements: all opinions on state- ments (i.e., unqualified, adverse, and qualified opinions) and the disclaimer of opinion. An adverse opinion is the opposite of an unqualified opinion. It states that the financial statements are not in accordance with GAAP. A disclaimer of opinion is an auditor’s declaration that no opinion is given. The standard applies to financial statements as a whole; that is, the standard applies equally to the set of financial statements and footnotes and to each individual financial statement and footnote. According to CAS 705, an explanation is required whenever there is a report reserva- tion. Thus, when an adverse opinion, qualifi ed opinion, or disclaimer of opinion is rendered, all the substantive reasons for doing so must be given in an additional paragraph(s). Other reporting standards relate to auditor responsibilities and identifying the financial statements covered by the opinion. Every time PAs (even when acting as accountants associated with unaudited financial statements) are associated by name or by action with financial statements, they must report on their work and responsibility. The character of
Image of page 12
Image of page 13
  • Fall '12
  • Smith
  • Auditor's report

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern