Audit Report Basics
What is the ultimate purpose of an audit report?
To form an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework
For which type of entity's audit report is the communication of Critical Audit Matters (CAMs) primarily required?
Public companies
Name one of the two primary situations that require or allow for additional wording in an unmodified audit report, according to the sources.
A Going Concern paragraph or an Emphasis of Matter paragraph or an Other Matter paragraph
Modified opinions are required when the financial statements are not presented fairly due to GAAP issues, or what other significant issue?
When a scope limitation exists
What specific issue requires the auditor to withdraw and issue a disclaimer of opinion, regardless of materiality or pervasiveness?
An Independence issue
What are the terms that must be included in the title of the audit report for public companies?
"Registered" and "Independent"
What is the term used for similar matters communicated in private company audit reports, although not always required?
Key Audit Matters (KAMs)
Which type of paragraph is added to an unmodified report if there is substantial doubt about the entity's ability to continue as a going concern?
A Going Concern paragraph
What two terms describe the key considerations used to determine the type of modified opinion required?
Materiality and pervasiveness
For audits performed under PCAOB standards, which entity does not accept modified opinions?
The SEC
What is the difference in terminology used for unmodified opinions for private companies (AICPA standards) versus public companies (PCAOB standards)?
Private companies receive an "unmodified" opinion, while public companies receive an "unqualified" opinion
According to the sources, CAMs are matters from the audit that were material and involved what type of judgments?
Especially challenging, subjective, or complex judgments
What type of opinion requires that an emphasis of matter paragraph not be included
adverse or disclaimer
What type of modified opinion is issued when the financial statements are presented fairly except for a particular issue that is material but not pervasive?
A Qualified opinion
What is the term for facts that become known to the auditor after the date of the audit report that, if known earlier, might have caused the auditor to revise the report?
Subsequently discovered facts
Give three standard components of an unqualified/unmodified audit report
Title, Addressee, Opinion Paragraph, Basis for Opinion, Critical Audit Matters (for public), Signature, Date, Auditor Tenure (for public)
Name two pieces of information the auditor must include in the audit report for each CAM identified
Identify the CAM, explain why it is a CAM, explain how it was addressed by the auditor, and refer to the relevant accounts/disclosures
What are the two reporting options for dealing with subsequently discovered facts mentioned in the sources?
Date the audit report as of the date of the subsequent fact or use dual dating (keeping the original report date and adding a new date for the subsequent fact reference)
If a GAAP issue is material and pervasive, what type of modified opinion must the auditor issue, stating that the financial statements are not presented fairly?
An Adverse opinion
What are the two reporting options for dealing with subsequently discovered facts mentioned in the sources?
Date the audit report as of the date of the subsequent fact or use dual dating (keeping the original report date and adding a new date for the subsequent fact reference)
The sources state that audit reports should follow standardized language and are not "creative writing." What professional standards guide the preparation of audit reports?
Recognized professional standards, such as Generally Accepted Auditing Standards (GAAS)
The communication of CAMs does not alter the auditor's opinion. In the audit report section on CAMs, what must the auditor explicitly state they are not doing by communicating CAMs?
They are not issuing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate
he sources mention Other Matter paragraphs. What type of matters are typically discussed in these paragraphs?
Matters the auditors want to bring attention to that are not required to be disclosed in the financial statements, typically relating to auditor-specific matters rather than financial accounting matters, such as audit issues or things the auditor may have done differently
If a scope limitation prevents the auditor from gathering sufficient appropriate evidence and is material and pervasive, what type of opinion must be issued, stating the auditor is unable to form an opinion?
A Disclaimer of opinion
For publicly traded companies required to have an audit of Internal Control over Financial Reporting (ICFR), what are the three types of opinions that can be issued over ICFR?
Unqualified (no material weaknesses), Adverse (one or more material weaknesses), and Disclaimer (unable to gather sufficient evidence)