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Презентация на тему Audit Reports

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Presentation OutlineThe Standard Audit ReportSection 404 of the Sarbanes-Oxley ActConditions Requiring an Explanatory Paragraph or Modified Report WordingOther Opinion Possibilities Scope LimitationGAAP DepartureLack of Independence Other Information
Chapter 3 Audit Reports Presentation OutlineThe Standard Audit ReportSection 404 of the Sarbanes-Oxley ActConditions Requiring an I. The Standard Audit ReportThe Seven Parts of the Auditor’s Standard ReportFive A. The Seven Parts of the Auditor’s Standard ReportReport title – Must B. Five Conditions for the Standard ReportAll 4 of the basic financial II. Section 404 of the Sarbanes-Oxley ActPCAOB Auditing Standard 2The Time Period CoveredThe Audit Report A. PCAOB Auditing Standard 2Section 404 requires the auditor of a public B. The Time Period CoveredAlthough the audit opinion on the financial statements C. The Audit ReportThe auditor may choose to issue separate reports or III. Conditions Requiring an Explanatory Paragraph or Modified Report WordingLack of ConsistencyGoing A. Lack of ConsistencyThe following affect consistency and require an explanatory paragraph B. Going Concern ProblemSAS No. 59 requires auditor to evaluate going concern C. Auditor Agrees with a Departure from GAAPAn auditor may issue an D. Emphasis of A MatterThe auditor may add an explanatory paragraph to E. Reports Involving Other AuditorsAssume ResponsibilityIf you accept responsibility for the other IV. Other Opinion PossibilitiesQualified OpinionAdverse OpinionDisclaimer of Opinion A. Qualified OpinionUse the term “except for” in the opinion paragraph to B. Adverse OpinionFinancials as a whole are not fairly presented. Used when C. Disclaimer of OpinionAuditor can not express an opinion.Disclaimer of opinion is V. Scope LimitationScope Limitation DefinedEffect of Scope Limitation on Audit Report – A. Scope Limitation DefinedAn unqualified opinion can only be issued for an B. Effect of Scope Limitation on Audit Report – Qualified OpinionIntroductory paragraph C. Effect of Scope Limitation on Audit Report – Disclaimer of OpinionIntroductory VI. GAAP DepartureGAAP Departure DefinedEffect of GAAP Departure on Audit Report – A. GAAP Departure DefinedAn unqualified opinion can only be issued if GAAP B. Effect of GAAP Departure on Audit Report – Qualified OpinionIntroductory paragraph C. Effect of GAAP Departure on Audit Report – Adverse OpinionIntroductory paragraph VII. Lack of IndependenceAn accountant who is not independent is required to VIII. Other InformationIn regard to other information included with the audited financial SummaryType of Report
Слайды презентации

Слайд 2 Presentation Outline
The Standard Audit Report
Section 404 of the

Presentation OutlineThe Standard Audit ReportSection 404 of the Sarbanes-Oxley ActConditions Requiring

Sarbanes-Oxley Act
Conditions Requiring an Explanatory Paragraph or Modified Report

Wording
Other Opinion Possibilities
Scope Limitation
GAAP Departure
Lack of Independence
Other Information

Слайд 3 I. The Standard Audit Report
The Seven Parts of

I. The Standard Audit ReportThe Seven Parts of the Auditor’s Standard

the Auditor’s Standard Report
Five Conditions for the Standard Report


Слайд 4 A. The Seven Parts of the Auditor’s Standard

A. The Seven Parts of the Auditor’s Standard ReportReport title –

Report
Report title – Must include the word independent.
Audit report

address – Customary to address to board of directors and stockholders to demonstrate independence.
Introductory paragraph – States that an audit has been performed; identifies the financial statements and appropriate dates; states that the financial statements are the responsibility of the entity’s management.
Scope paragraph – States that auditor followed GAAS or PCAOB standards and indicates that the audit only provides reasonable assurance.
Opinion paragraph – Communicates the results of the audit.
Name of CPA firm or practitioner.
Audit report date showing last day of field work. Auditor is held accountable only through this date

Слайд 5 B. Five Conditions for the Standard Report
All 4

B. Five Conditions for the Standard ReportAll 4 of the basic

of the basic financial statements are included.
Three General Standards

have been followed.
Sufficient evidence has been accumulated and three Field Work Standards have been followed.
Financial Statements are in accordance with U.S. GAAP.
No circumstances require an explanatory paragraph or modified wording of the report.

Слайд 6 II. Section 404 of the Sarbanes-Oxley Act
PCAOB Auditing

II. Section 404 of the Sarbanes-Oxley ActPCAOB Auditing Standard 2The Time Period CoveredThe Audit Report

Standard 2
The Time Period Covered
The Audit Report


Слайд 7 A. PCAOB Auditing Standard 2
Section 404 requires the

A. PCAOB Auditing Standard 2Section 404 requires the auditor of a

auditor of a public company to attest to management’s

report on the effectiveness of internal control over financial reporting.
PCOAB Auditing Standard 2 requires the audit of internal control to be integrated with the audit of the financial statements.

Слайд 8 B. The Time Period Covered
Although the audit opinion

B. The Time Period CoveredAlthough the audit opinion on the financial

on the financial statements addresses multiple reporting periods, management’s

assertion about the effectiveness of internal control is as of the end of the most recent fiscal year.

Слайд 9 C. The Audit Report
The auditor may choose to

C. The Audit ReportThe auditor may choose to issue separate reports

issue separate reports or a combined report, such as

the one shown in Figure 3-3 on page 50.
The combined report on financial statements and internal control over financial reporting addresses both the financial statements and management’s report on internal control over financial reporting.

Слайд 10 III. Conditions Requiring an Explanatory Paragraph or Modified

III. Conditions Requiring an Explanatory Paragraph or Modified Report WordingLack of

Report Wording
Lack of Consistency
Going Concern Problem
Auditor Agrees with a

Departure from GAAP
Emphasis of a Matter
Reports Involving Other Auditors

Note: The first four reports above require an explanatory paragraph
following the opinion paragraph. There is no change in the wording
of the three standard paragraphs. For reports involving other
auditors, the three standard report paragraphs are modified but
there is not a separate explanatory paragraph.


Слайд 11 A. Lack of Consistency
The following affect consistency and

A. Lack of ConsistencyThe following affect consistency and require an explanatory

require an explanatory paragraph when material (See Fig. 3-4

on page 51):
Change in accounting principles (i.e., FIFO to LIFO)
Change in reporting entities (i.e., change is companies in combined financial statements)
Corrections of changing from unacceptable to acceptable accounting principles.

The following affect comparability but not consistency. If material these items may require disclosure, but not a explanatory paragraph:
Change in accounting estimate (i.e., asset’s depreciable life)
Error correction not involving accounting (i.e., math error)
Variations in format and presentation.
Changes due to substantially different events such as the sale of a subsidiary.


Слайд 12 B. Going Concern Problem
SAS No. 59 requires auditor

B. Going Concern ProblemSAS No. 59 requires auditor to evaluate going

to evaluate going concern for a reasonable time (not

over one year from date of financial statements).
Include an explanatory paragraph that includes the phrases “substantial doubt” and “going concern.” See Figure 3-5 on page 53.

8

Note: SAS No. 59 permits but does not require a disclaimer of opinion
when there is substantial doubt about ability to continue as a going
concern.


Слайд 13 C. Auditor Agrees with a Departure from GAAP
An

C. Auditor Agrees with a Departure from GAAPAn auditor may issue

auditor may issue an unqualified opinion when a departure

from GAAP is necessary to prevent financials from being misleading.
Modify report wording by adding an explanatory paragraph.

Слайд 14 D. Emphasis of A Matter
The auditor may add

D. Emphasis of A MatterThe auditor may add an explanatory paragraph

an explanatory paragraph to emphasize items such as:
Significant related

party transactions
Important subsequent events
Factors affecting comparability of financial statements.
Material uncertainties disclosed in the notes to the financial statements.

Слайд 15 E. Reports Involving Other Auditors
Assume Responsibility
If you accept

E. Reports Involving Other AuditorsAssume ResponsibilityIf you accept responsibility for the

responsibility for the other auditor’s work (and it is

unqualified) the standard report may be issued without modification.
If the other auditors report is qualified and the qualification is material to the financial statements taken as a whole, you must qualify your report.

Shared Responsibility
The opinion is unaffected (i.e. can be unqualified).
Modify all three paragraphs of the standard report (See Figure 3-6 on page 54).

Assume No Responsibility
A qualified opinion or disclaimer, depending on materiality, is required.


Слайд 16 IV. Other Opinion Possibilities
Qualified Opinion
Adverse Opinion
Disclaimer of Opinion

IV. Other Opinion PossibilitiesQualified OpinionAdverse OpinionDisclaimer of Opinion

Слайд 17 A. Qualified Opinion
Use the term “except for” in

A. Qualified OpinionUse the term “except for” in the opinion paragraph

the opinion paragraph to exclude a specific item from

the auditor’s opinion.
Qualified opinion is appropriate when there is a:
Material scope limitation (qualified scope, additional paragraph, and qualified opinion)
Material departure from GAAP (additional paragraph, qualified opinion)

Note: Materiality is defined in Table 3-1 on page 57.


Слайд 18 B. Adverse Opinion
Financials as a whole are not

B. Adverse OpinionFinancials as a whole are not fairly presented. Used

fairly presented.
Used when auditor feels that financial statements

contain contain a highly material departure from GAAP.

An auditor may have to play the bad guy to protect the public

Note: Materiality is defined in Table 3-1 on page 57.


Слайд 19 C. Disclaimer of Opinion
Auditor can not express an

C. Disclaimer of OpinionAuditor can not express an opinion.Disclaimer of opinion

opinion.
Disclaimer of opinion is appropriate when:
There is a highly

material scope limitation.
There is a lack of independence

Note: Auditor has option to issue a disclaimer
of opinion for a going concern problem.

Note: Materiality is defined in Table 3-1 on page 57.


Слайд 20 V. Scope Limitation
Scope Limitation Defined
Effect of Scope Limitation

V. Scope LimitationScope Limitation DefinedEffect of Scope Limitation on Audit Report

on Audit Report – Qualified Opinion
Effect of Scope Limitation

on Audit Report – Disclaimer of Opinion


Слайд 21 A. Scope Limitation Defined
An unqualified opinion can only

A. Scope Limitation DefinedAn unqualified opinion can only be issued for

be issued for an immaterial scope limitation.
If the scope

is restricted by the client, the auditor will usually disclaim an opinion.
If scope is restricted by other conditions:
Qualified opinion if statements “as a whole” are not affected.
Disclaimer if scope limitation affects numerous financial statement items.

Note: Materiality is defined in Table 3-1 on page 57.


Слайд 22 B. Effect of Scope Limitation on Audit Report

B. Effect of Scope Limitation on Audit Report – Qualified OpinionIntroductory

– Qualified Opinion
Introductory paragraph is same as in standard

report.
Scope paragraph identifies limitation by adding “except as discussed in the following paragraph.”
A separate explanatory paragraph is added to the report to describe the scope limitation.
Opinion paragraph wording is changed to express an “except for” qualified opinion.

Note: See Figure 3-7 on page 59.


Слайд 23 C. Effect of Scope Limitation on Audit Report

C. Effect of Scope Limitation on Audit Report – Disclaimer of

– Disclaimer of Opinion
Introductory paragraph modified to say “We

were engaged to audit…” rather than “We have audited …”.
Scope paragraph is omitted.
A separate explanatory paragraph is added to the report to describe the scope limitation.
Opinion paragraph wording is changed to disclaim an opinion.

Note: See Figure 3-8 on page 60.


Слайд 24 VI. GAAP Departure
GAAP Departure Defined
Effect of GAAP Departure

VI. GAAP DepartureGAAP Departure DefinedEffect of GAAP Departure on Audit Report

on Audit Report – Qualified Opinion
Effect of Scope Limitation

on Audit Report – Adverse Opinion


Слайд 25 A. GAAP Departure Defined
An unqualified opinion can only

A. GAAP Departure DefinedAn unqualified opinion can only be issued if

be issued if GAAP departure is immaterial.
If financial statements

“taken as a whole” are not misleading, then a qualified opinion can be issued. Required for omission of statement of cash flows (SAS 58).
If financial statements “taken as a whole” are misleading, then an adverse opinion must be issued. See Nature of Item on page 58.

How misleading are the financial statements?

Note: Materiality is defined in Table 3-1 on page 57.


Слайд 26 B. Effect of GAAP Departure on Audit Report

B. Effect of GAAP Departure on Audit Report – Qualified OpinionIntroductory

– Qualified Opinion
Introductory paragraph is same as in standard

report.
Scope paragraph is the same as the standard report.
A separate explanatory paragraph is added to the report to describe the GAAP departure and its effect on the financial statements.
Opinion paragraph wording is changed to express an “except for” qualified opinion.

Note: See Figures 3-9 and 3-11 on pages 60-61.


Слайд 27 C. Effect of GAAP Departure on Audit Report

C. Effect of GAAP Departure on Audit Report – Adverse OpinionIntroductory

– Adverse Opinion
Introductory paragraph is same as in standard

report.
Scope paragraph is the same as the standard report.
Separate explanatory paragraphs are added to the report to describe the GAAP departures and their effects on the financial statements.
Opinion paragraph wording is changed to express an adverse opinion .

Note: See Figure 3-10 on page 61.


Слайд 28 VII. Lack of Independence
An accountant who is not

VII. Lack of IndependenceAn accountant who is not independent is required

independent is required to issue a special disclaimer of

opinion.
One paragraph report with no title (See Figure 3-12 on page 61).
No opinion is expressed.

Слайд 29 VIII. Other Information
In regard to other information included

VIII. Other InformationIn regard to other information included with the audited

with the audited financial statements in the annual report,

the auditor is required to read the information to ensure that it is not materially inconsistent with the audited financial statement.
Auditors are not currently responsible for information on a company’s web site, even if it includes audited financial statements.

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