Audit Reports
Barefoot Corporation, a wholly owned subsidiary of Sandy, Inc., is audited by another CPA firm. As the auditor of Sandy, Inc., you have assured yourself of the other CPA firm's independence and professional reputation. However you are unwilling to take responsibility for its audit work. Assume the situation is material. What type of audit report do you issue?
Unqualified with a reference to other auditors.
This type of engagement uses current, known information to put together financial statements for a client, typically looking towards the future.
Compilation
The management of Helsinki Corporation has decided to exclude the statement of cash flows from its financial statements because it believes that its bankers do not find the statements to be useful. Assume the exclusion is material.
Adverse
Most entities that are in the electronic banking industry will request that a firm complete this type of report for them to give their customers piece of mind.
SOC 3 (or 2)
During your audit of Burnin' Coal Company, the controller, Eduardo Greene, refuses to allow you to confirm accounts receivable because he is concerned about complaints from the customers. You are unable to satisfy yourself about accounts receivable by other audit procedures and you are concerned about Eduardo's true motives. Assume the amount is material.
Disclaimer
True or False: Reviews are attest services.
True
On January 31, 2025, Playtime Toy Manufacturing hired your CPA firm to audit the company's financial statements for the prior year. You were unable to observe the client's inventory at December 31, 2024. However, you were able to satisfy yourself about the inventory balance using other auditing procedures. Consider this item material, but not pervasive.
Qualified with Explanatory Paragraph
Daily Double: For an agreed-upon procedures engagement, a firm will issue a report at the end of the engagement over their findings. In order to do so, that firm must be...
Independent.
Kearney Bros. Inc. leases its manufacturing facility from a partnership controlled by the chief executive officer and major shareholder of the company (related party relationship). Your review of the lease indicates that the rental terms are in excess of rental terms for similar buildings in the area. The company refuses to disclose this related-party transaction in the financial statements. Consider this time material, but not pervasive.
Qualified, with an explanatory paragraph.
Negative assurance offered in the majority of attest services is often shown with this phrase in the report:
"Nothing came to our attention that requires adjustment"