1.

Explain why auditors' reports are important to users of financial

statements and why it is desirable to have standard wording.
Auditors' reports are important to users of financial statements because
they inform users of the auditor's opinion as to whether or not the financial
statements are fairly stated or whether no conclusion can be made with
regard to the fairness of their presentation. Users especially look for any
deviation from the wording of the standard unmodified report and the
reasons and implications of such deviations. Having standard wording
improves communications for the benefit of users of the auditor's report.
When there are departures from the standard wording, users are more
likely to recognize and consider situations requiring a modification or
qualification to the auditor's report or opinion.
2. What are the purposes of the scope paragraph under the auditor's
responsibility in the auditor's report? Identify the most important
information included in the scope paragraph.
The purpose of the scope paragraph under the auditor's responsibility is to
inform the financial statement users of the nature of the audit procedures
performed. The information in the scope paragraph includes:

1. Procedures used to obtain audit evidence about the amounts and

disclosures in the financial statements.
2. The audit procedures selected depend on the auditor's judgment, and
consider the auditor's assessment of the risks of material misstatement,
whether due to fraud or error.
3. As part of this risk assessment, the auditor considers internal control
over financial reporting in the design of the audit procedures.
4. An audit includes evaluating the appropriateness of the accounting
policies used, the reasonableness of significant estimates, and the overall
presentation of the financial statements.
3. What are the purposes of the opinion paragraph in the auditor's report?
Identify the most important information included in the opinion
paragraph
 The purpose of the opinion paragraph is to state the auditor's conclusions
based upon the results of the audit evidence. The most important
information in the opinion paragraph includes:
1. The words "in our opinion," which indicate that the conclusions are
based on professional judgment.
2. A statement about whether the financial statements were presented
fairly and in accordance with generally accepted accounting principles
along with indication of the fiscal year(s) associated with those statements.
4. On February 17, 2017, a CPA completed all the evidence gathering
procedures on the audit of the financial statements for the Buckheizer
Technology Corporation for the year ended December 31, 2016. The audit
is satisfactory in all respects except for the existence of a change in
accounting principles from FIFO to LIFO inventory valuation, which results
in an explanatory paragraph on consistency. On February 26, the auditor
completed the tax return and the draft of the audit report. The final audit
report was completed, attached to the financial statements, and
delivered to the client on March 7. What is the appropriate date on the
auditor's report?
The auditor's report should be dated February 17, 2017, the date on which
the auditor concluded that he or she had sufficient appropriate evidence to
support the auditor's opinion.
5. What four circumstances are required for a standard unmodified opinion
audit report to be issued?
A standard unmodified opinion audit report may be issued under the
following circumstances:

1. All statements-balance sheet, income statement, statement of retained

earnings, and statement of cash flows-are included in the financial
statements.
2. Sufficient appropriate evidence has been accumulated and the auditor
has conducted the engagement in a manner that enables him or her to
conclude that the audit was performed in accordance with auditing
standards.
 3. The financial statements are presented in accordance with appropriate
accounting standards such as U.S. generally accepted accounting principles
or IFRS. This also means that adequate disclosures have been included in
the footnotes and other parts of the financial statements.
4. There are no circumstances requiring the addition of an explanatory
paragraph or modification of the wording of the report.
6. Describe the information included in the introductory, scope, and opinion
paragraphs in a separate audit report on the effectiveness of internal
control over financial reporting. What is the nature of the additional
paragraphs in the audit report?
The introductory, scope, and opinion paragraphs are modified to include
reference to management's report on internal control over financial
reporting, and the scope of the auditor's work and opinion on internal
control over financial reporting. The introductory and opinion paragraphs
also refer to the framework used to evaluate internal control. Two
additional paragraphs are added between the scope and opinion
paragraphs that define internal control and describe the inherent
limitations of internal control.
7. Compare the wording in the standard unmodified opinion audit report for
a nonpublic entity under AICPA auditing standards in Figure 3-1 with the
wording for a public company audit under PCAOB auditing standards in
Figure 3-3 . How are the reports similar? How are they different?
The standard unmodified opinion audit report for a non-public entity under
AICPA auditing standards and the standard unqualified report for a public
company under PCAOB auditing standards are very similar in substance.
The introductory paragraphs are similar, although the public company
report includes the responsibilities of management and the auditor. In
contrast, the report for the non-public entity in Figure 3-1 has separate
paragraphs for management's and the auditor's responsibility. These
paragraphs provide additional information on the nature of these
responsibilities.

The scope paragraphs in each report are similar. However, there are
 differences in the description of the nature of the auditor's testing. The
report for the non-public company indicates that the procedures are based
on the auditor's judgment and consider the risks of material misstatement.
The report for the non- public company also indicates that the auditor
considers internal control in designing the audit procedures, and not for the
purpose of expressing an opinion on internal control.
8. Distinguish between an unmodified opinion audit report that contains an
emphasis-of-matter explanatory paragraph and a qualified report.
An unmodified opinion audit report with an explanatory paragraph or
modified wording is the same as a standard unmodified opinion report
except that the auditor believes it is necessary to provide additional
information about the audit or the financial statements. For a qualified
report, either there is a scope limitation (condition 1) or a failure to follow
generally accepted accounting principles (condition 2). Under either
condition, the auditor concludes that the overall financial statements are
fairly presented.
9. Describe what is meant by reports involving the use of other auditors.
What are the three options available to the primary auditor responsible
for the opinion, and when should each be used?
When another CPA has performed part of the audit, the primary auditor
issues one of the following types of reports based on the circumstances.

1. No reference is made to the other auditor. This will occur if the other
auditor audited an immaterial portion of the financial statements, the other
auditor is known or closely supervised, or if the principal auditor has
thoroughly reviewed the other auditor's work.
2. Issue a shared opinion in which reference is made to the other auditor.
This type of report is issued when it is impractical to review the work of the
other auditor or when a portion of the financial statements audited by the
other CPA is material in relation to the total.
3. The report may be qualified if the principal auditor is not willing to
assume any responsibility for the work of the other auditor. A disclaimer
may be issued if the segment audited by the other CPA is highly material.
10.The client changed from FIFO to LIFO inventory valuation in the current
year and reflected this change in their financial statements. How should
this be reflected in the auditor's report?
Even though this change has been reflected in the financial statements, a
separate explanatory paragraph is required to explain the change in
generally accepted accounting principles in the first year in which the
change took place.
11.Distinguish between changes that affect consistency and those that may
affect comparability but not consistency. Give an example of each.
Changes that affect the consistency of the financial statements may
involve any of the following:
a.Change in accounting principle
b.Change in reporting entity
c.Corrections of errors involving accounting principles.
12.How do the eight parts of a standard unmodified opinion audit report for
nonpublic companies differ from those found in a qualified opinion
report?
Auditor's responsibility: The first two auditor responsibility paragraphs are
the same as the standard unmodified opinion report. The third paragraph is
modified to state that the audit evidence obtained provides a sufficient and
appropriate basis for the qualified audit opinion.
That paragraph is following by a new paragraph that describes the
basis for the qualified opinion.
Opinion paragraph: The opinion paragraph is modified to include the term
except for in the opinion paragraph.
13.Distinguish between a qualified opinion, an adverse opinion, and a
disclaimer of opinion, and explain the circumstances under which each is
appropriate.
A qualified opinion states that there has been either a limitation on the
scope of the audit of material accounts, transactions, or disclosures or a
material departure from GAAP in the financial statements, but that the
auditor believes that the overall financial statements are fairly presented.
 This type of opinion may not be used if the auditor believes the exceptions
being reported upon are extremely material, in which case a disclaimer or
adverse opinion would be used.
An adverse opinion states that the auditor believes the overall financial
statements are so materially misstated or misleading that they do not
present fairly in accordance with GAAP the financial position, results of
operations, or
cash flows.
A disclaimer of opinion states that the auditor has been unable to satisfy
himself or herself as to whether or not the overall financial statements are
fairly presented because of a significant limitation of the scope of the audit,
or a non- independent relationship under the AICPA Code of Professional
Conduct between the auditor and the client.
14.Distinguish between a report qualified due to a GAAP departure and one
qualified due to a scope limitation.
A qualified report due to a scope limitation is issued when the auditor can
neither perform procedures that he or she considers necessary nor satisfy
himself or herself by using alternative procedures, usually due to the
existence of conditions beyond the client's or the auditor's control, but the
amount involved in the financial statements is not highly material. An
important part of qualified opinion due to a scope limitation is that it
results from not accumulating sufficient appropriate audit evidence, either
because of the client's request or because of circumstances beyond
anyone's control. When the opinion is qualified due to a scope limitation,
the auditor modifies both the scope and opinion paragraphs. The scope
paragraph is modified to indicate that the auditor's scope has been
restricted and the opinion paragraph is modified to include the qualified
opinion.
A report qualified as to opinion only results when the auditor has
accumulated sufficient appropriate evidence but has concluded that the
financial statements are not correctly stated. The only circumstance in
which an opinion only qualification is appropriate is for material, but not
highly material, departures from GAAP. When the opinion is qualified due
to a GAAP departure, only the opinion paragraph is modified to include the
 qualified opinion. The scope paragraph is not modified because there has
been no limitation on the auditor's scope.
15.Define materiality as it is used in audit reporting. What conditions will
affect the auditor's determination of materiality?
A misstatement in the financial statements can be considered material if
knowledge of the misstatement would affect a decision of a reasonable
user of the statements.
Conditions that affect the auditor's determination of materiality include:
Potential users of the financial statements, Dollar amounts of the following
items: net income before taxes,
total assets, current assets, current liabilities, and owners' equity, Nature of
the potential misstatements-certain misstatements, such as fraud, are likely
to be more important to users of the financial statements than other
misstatements.
16.Explain how materiality differs for failure to follow GAAP and for lack of
independence.
Materiality for lack of independence in audit reporting is easiest to define.
If the auditor lacks independence as defined by the AICPA Code of
Professional Conduct, it is always considered highly material and therefore
a disclaimer of opinion is always necessary. That is, either the CPA is
independent or not independent. For failure to follow GAAP, there are
three levels of materiality: immaterial, material, and highly material
17.How does the auditor's opinion differ between scope limitations caused
by client restrictions and limitations resulting from conditions beyond the
client's control? Under which of these two will the auditor be most likely
to issue a disclaimer of opinion? Explain.
The auditor's opinion may be qualified by scope limitations caused by client
restrictions or by limitations resulting from conditions beyond the client's
control. The former occurs when the client will not, for example, permit the
auditor to confirm material receivables or physically observe inventories.
The latter may occur when the engagement is not agreed upon until after
the client's year-end when it may not be possible to physically observe
 inventories or confirm receivables.
A disclaimer of opinion is issued if the scope limitation is so material that
the auditor cannot determine if the overall financial statements are fairly
presented. If the scope limitation is caused by the client's restriction, the
auditor should be aware that the reason for the restriction might be to
deceive the auditor. For this reason, a disclaimer is more likely for client
restrictions than for conditions beyond anyone's control.
When there is a scope restriction that results in the failure to verify
material, but not pervasive accounts, a qualified opinion may be issued.
This is more likely when the scope limitation is for conditions beyond the
client's control than for restrictions by the client.
18.When an auditor discovers more than one condition that requires
departure from or modification of the standard unmodified opinion audit
report, what should the auditor's report include?
When the auditor discovers more than one condition that requires a
departure from or a modification of a standard opinion audit report, the
report should be modified for each condition. An exception is when one
condition neutralizes the other condition. An example would be when the
auditor is not independent and there is also a scope limitation. In this
situation the lack of independence overshadows the scope limitation.
Accordingly, the scope limitation should not be mentioned.
19.Discuss why the adoption of international accounting and auditing
standards might be beneficial to investors and auditors.
Given the global nature of the financial markets, investors, both in the U.S.
and abroad, frequently make investments in companies that are located all
over the world. While many companies located outside the U.S. already
prepare financial statements in accordance with International Financial
Reporting Standards (IFRS), financial statements of U.S.-based entities are
based on
U.S. generally accepted accounting principles, and differences in the basis
of presentation makes the analysis of U.S. and non-U.S.-based company
financial statements difficult. Similarly, differences exist in auditing
standards issued across the globe, so the adoption of International
 Statements on Auditing (ISAs) would mean auditors from around the globe
are conducting their audits using the same set of standards. The embrace
of IFRS and ISAs will help investors in their analysis of audited financial
statements prepared across the globe.

1. What are the eight parts of a standard unmodified opinion audit report
for a nonpublic entity and what is the main content provided in each
part?
1. Report Title
2. Audit report Address
3. Intro Paragraph
4. Management's Responsibility
5. Auditor's Responsibility
6. Opinion paragraph
7. Signature and address of CPA Firm
8. Audit report date
2. What are the three levels of materiality and what type of opinion is
needed?
1. Immaterial (Unmodified)
2. Material (Qualified)
3. Highly Material (Disclaimer or Adverse)
3. What are the three conditions that require a departure from an
unmodified opinion audit report? Give an example of each
The three conditions requiring a departure from an unqualified opinion are:

1. The scope of the audit has been restricted. One example is when the
client will not permit the auditor to confirm material receivables. Another
example is when the engagement is not agreed upon until after the client's
year-end when it may be impossible to physically observe inventories.
 2. The financial statements have not been prepared in accordance with
generally accepted accounting principles. An example is when the client
insists upon using replacement costs for fixed assets.

3. The auditor is not independent. An example is when the auditor owns

stock in the client's business.
4. When should the auditor include an explanatory paragraph in an
unmodified opinion report?
...
5. What are three alternative opinions that may be appropriate when the
client's financial statements are not in accordance with GAAP? Under
what circumstance is each appropriate?
The three alternative opinions that may be appropriate when the client's
financial statements are not in accordance with GAAP are an unqualified
opinion, qualified as to opinion only and adverse opinion. Determining
which is appropriate depends entirely upon materiality. An unqualified
opinion is appropriate if the GAAP departure is immaterial (standard
unqualified) or if the auditor agrees with the client's departure from GAAP
(unqualified with explanatory paragraph). A qualified opinion is appropriate
when the deviation from GAAP is material but not highly material; the
adverse opinion is appropriate when the deviation is highly material.
6. Explain why auditor's reports are important to users of financial
statements and why it is desirable to have standard wording
Auditor's reports increase trust in financial statements.
Standard wording makes it easier / more uniform to understand.
Long answer:
Auditor's reports are important to users of financial statements because
they inform users of the auditor's opinion as to whether or not the
statements are fairly stated or whether no conclusion can be made with
regard to the fairness of their presentation. Users especially look for any
deviation from the wording of the standard unqualified report and the
 reasons and implications of such deviations. Having standard wording
improves communications for the benefit of users of the auditor's report.
When there are departures from the standard wording, users are more
likely to recognize and consider situations requiring a modification or
qualification to the auditor's report or opinion.
7. What are the purposes of the scope paragraph under the auditor's
responsibility in the auditor's report?
Identify the most important information in the scope paragraph.
The purpose of the scope paragraph is to inform the reader that audit was
conducted with GAAS, and whether audit provides a reasonable basis for an
opinion.
- Auditor followed GAAS (reasonable assurance)
- Statements are free of material misstatement
- Discussion of audit evidence
- Statement that the auditor believes the evidence accumulated was
appropriate for the circumstances to express the opinion presented.
8. What are are the purposes of the opinion paragraph in the auditor's
report?
Identify the most important information included in the opinion paragraph.
The purpose of the opinion paragraph is to state the auditor's conclusions
based upon the results of the audit evidence. The most important
information in the opinion paragraph includes:

1. The words "in our opinion" which indicate that the conclusions are based
on professional judgment.
2. A restatement of the financial statements that have been audited and
the dates thereof or a reference to the introductory paragraph.
3. A statement about whether the financial statements were presented
fairly and in accordance with generally accepted accounting principles.
9. On February 17, 2017, a CPA completed all the evidence gathering
procedures on the audit of financial statements for the Buckheizer
Technology Corporation for the year ended December 31, 2016. The audit
is satisfactory in all respects except for the existence of a change in
 accounting principles from FIFO to LIFO inventory valuation, which results
in an explanatory paragraph on consistency. On February 26, the auditor
completed the tax return and the draft of the audit report. The final audit
report was completed, attached to the financial statements, and
delivered to the client on March 7. What is the appropriate date of the
auditor's report?
The auditor's report should be dated February 17, 2017.
What four circumstances are required for a standard unmodified opinion
audit report to be issued?
1. All statements are included in the financial statements
2. Sufficient appropriate evidence has been accumulated
3. Financial statements are presented with GAAP or IFRS
4. There are no circumstances requiring addition of an explanatory
paragraph or modification of the wording of the report.
10.Describe the information included in the introductory, scope, and opinion
paragraphs in a separate audit report on the effectiveness of internal
control over financial reporting. What is the nature of the additional
paragraphs in the audit report?
The introductory, scope and opinion paragraphs are modified to include
reference to management's report on internal control over financial
reporting and the scope of the auditor's work and opinion on internal
control over financial reporting.
The introductory and opinion paragraphs also refer to the framework used
to evaluate internal control. he additional paragraphs are added between
the scope and opinion paragraphs that define internal control and describe
the inherent limitations of internal control.
11.Compare standard unmodified opinion audit report for a nonpublic entity
under AICPA auditing standards (p. 48) with the wording for a public
company audit under PCAOB auditing standards in (p. 52) How are they
similar? How are they different?
Nonpublic:
- Heading
 - Report Title
- Audit Report Address
- Introductory Pargraph
- Management's Responsiblity
- Auditor's Responsibility
- Scope paragraph
- Auditor's Opinion
- Signature and Address of CPA firm
- Audit Report Date

Public:
- Introductory Paragraph
- Scope paragraph
- Opinion paragraph

Public (separate report):

- Introductory Paragraph
- Scope Paragraph
- Definition Paragraph
- Inherent Limitations Paragraph
- Opinion Paragraph
- Cross Reference Paragraph
12.Distinguish between an unmodified opinion audit report that contains an
emphasis-of-matter explanatory paragraph and a qualified report
Unmodified: Complete audit took place with satisfactory results & financial
statements fairly represented, but author believes additional information
required

Qualified: Auditor concludes overall financial statements are fairly

presented, but scope has been materially restricted or accounting
standards not followed when preparing financial statements
13.Describe what is meant by reports involving the use of other auditors.
What are the three options available to the primary auditor responsible
for the opinion, and when should each be used?
When another CPA has performed part of the audit, the primary auditor
issues one of the following types of reports based on the circumstances.
1. No reference is made to the other auditor. This will occur if the other
auditor audited an immaterial portion of the statement, the other auditor is
known or closely supervised, or if the principal auditor has thoroughly
reviewed the other auditor's work.
2. Issue a shared opinion in which reference is made to the other auditor.
This type of report is issued when it is impractical to review the work of the
other auditor or when a portion of the financial statements audited by the
other CPA is material in relation to the total.
3. The report may be qualified if the principal auditor is not willing to
assume any responsibility for the work of the other auditor. A disclaimer
may be issued if the segment audited by the other CPA is highly material.
14.The client changed from FIFO to LIFO inventory valuation in the current
year and reflected this change in their financials. If auditor does not
concur with the appropriateness of this change, How should this be
reflected in the auditor's report?
Qualified Opinion
15.Distinguish between changes that affect consistency and those that may
affect comparability but not consistency. Give an example of each.
Changes that affect the consistency of the financial statements may involve
any of the following:
a. Change in accounting principle
b. Change in reporting entity
c. Corrections of errors involving accounting principles.
An example of a change that affects consistency would be a change in the
method of computing depreciation from straight line to an accelerated
method. A separate explanatory paragraph is required if the amounts are
material.
Comparability refers to items such as changes in estimates, presentation,
 and events rather than changes in accounting principles. For example, a
change in the estimated life of a depreciable asset will affect the
comparability of the statements. In that case, no explanatory paragraph for
lack of consistency is needed, but the information may require disclosure in
the statements.
16.Distinguish between a qualified opinion, an adverse opinion, and a
disclaimer of opinion, and explain the circumstances under which each is
appropriate
A qualified opinion states that there has been either a limitation on the
scope of the audit or a departure from GAAP in the financial statements,
but that the auditor believes that the overall financial statements are fairly
presented. This type of opinion may not be used if the auditor believes the
exceptions being reported upon are extremely material, in which case a
disclaimer or adverse opinion would be used.
An adverse opinion states that the auditor believes the overall financial
statements are so materially misstated or misleading that they do not
present fairly in accordance with GAAP the financial position, results of
operations, or cash flows.
A disclaimer of opinion states that the auditor has been unable to satisfy
him or herself as to whether or not the overall financial statements are
fairly presented because of a significant limitation of the scope of the audit,
or a nonindependent relationship under the Code of Professional Conduct
between the auditor and the client.
Examples:
Disclaimer - Material physical inventories not observed and the inventory
cannot be verified through other procedures.
Lack of indepdence by the auditor
Adverse - A highly material departure from GAAP.
Qualified - Inability to confirm the existence of an asset which is material
but not extremely material in value.
17.DIstinguish between a report qualified due to a GAAP departure and one
qualified due to a scope limitation.
 A qualified report due to a scope limitation is issued when the auditor can
neither perform procedures that he or she considers necessary nor satisfy
himself or herself by using alternative procedures, usually due to the
existence of conditions beyond the client's or the auditor's control, but the
amount involved in the financial statements is not highly material. An
important part of qualified opinion due to a scope limitation is that it
results from not accumulating sufficient appropriate audit evidence, either
because of the client's request or because of circumstances beyond
anyone's control. When the opinion is qualified due to a scope limitation,
the auditor modifies both the scope and opinion paragraphs. The scope
paragraph is modified to indicate that the auditor's scope has been
restricted and the opinion paragraph is modified to include the qualified
opinion.
A report qualified as to opinion only results when the auditor has
accumulated sufficient appropriate evidence but has concluded that the
financial statements are not correctly stated. The only circumstance in
which an opinion only qualification is appropriate is for material, but not
highly material, departures from GAAP. When the opinion is qualified due
to a GAAP departure, only the opinion paragraph is modified to include the
qualified opinion. The scope paragraph is not modified because there has
been no limitation on the auditor's scope.
18.Define materiality as it is used in audit reporting. What conditions will
affect the auditor's determination of materiality?
The common definition of materiality as it applies to accounting and,
therefore, to audit reporting is:
A misstatement in the financial statements can be considered material if
knowledge of the misstatement would affect a decision of a reasonable
user of the statements.
Conditions that affect the auditor's determination of materiality include:
Potential users of the financial statements
Dollar amounts of the following items: net income before taxes, total
assets, current assets, current liabilities, and owners' equity
Nature of the potential misstatements—certain misstatements, such as
 fraud, are likely to be more important to users of the financial statements
than other misstatements.
19.Explain how materiality differs for failure to follow GAAP and for lack of
independence
Materiality for lack of independence in audit reporting is easiest to define.
If the auditor lacks independence as defined by the Code of Professional
Conduct, it is always considered highly material and therefore a disclaimer
of opinion is always necessary. That is, either the CPA is independent or not
independent. For failure to follow GAAP, there are three levels of
materiality: immaterial, material, and highly material.
20.How does the auditor's opinion differ between scope limiations caused by
client restrictions and limitations resulting from conditions beyond the
client's control? Under which of these two will the auditor be most likely
to issue a disclaimer of opinion? Explain.
The auditor's opinion may be qualified by scope limitations caused by client
restrictions or by limitations resulting from conditions beyond the client's
control. The former occurs when the client will not, for example, permit the
auditor to confirm material receivables or physically observe inventories.
The latter may occur when the engagement is not agreed upon until after
the client's year-end when it may not be possible to physically observe
inventories or confirm receivables.
A disclaimer of opinion is issued if the scope limitation is so material that
the auditor cannot determine if the overall financial statements are fairly
presented. If the scope limitation is caused by the client's restriction the
auditor should be aware that the reason for the restriction might be to
deceive the auditor. For this reason, a disclaimer is more likely for client
restrictions than for conditions beyond anyone's control.
When there is a scope restriction that results in the failure to verify
material, but not pervasive accounts, a qualified opinion may be issued.
This is more likely when the scope limitation is for conditions beyond the
client's control than for restrictions by the client.
21.What is a scope limitation?
 A scope limitation is a restriction on an audit that is caused by the client,
issues beyond the control of the client, or other events that do not allow
the auditor to complete all aspects of his or her audit procedures.
Examples of events causing a scope limitation are the disappearance of
relevant evidentiary matter and the client's restriction on contact with
customers to confirm the existence of accounts receivable.
22.What is a disclaimer of opinion?
A disclaimer of opinion states that the auditor has been unable to satisfy
him or herself as to whether or not the overall financial statements are
fairly presented because of a significant limitation of the scope of the audit,
or a nonindependent relationship under the Code of Professional Conduct
between the auditor and the client.
23.When an auditor discovers more than one condition that requires
departure from or modification of the standard unmodified opinion audit
report, what should the auditor's report include?
When the auditor discovers more than one condition that requires a
departure from or a modification of a standard unqualified report, the
report should be modified for each condition. An exception is when one
condition neutralizes the other condition. An example would be when the
auditor is not independent and there is also a scope limitation. In this
situation the lack of independence overshadows the scope limitation.
Accordingly, the scope limitation should not be mentioned.
24.Discuss why the adoption of international accounting and auditing
standards might be beneficial to investors and auditors?
Because audits of U.S. financial statements are only prepared with GAAP,
preparing the audits using IFRS and ISAs can help international investors
make decisions.
25.What is an unmodified opinion?
Auditor's opinion about financials contains no material exceptions or
qualifications.
What is an emphasis-of-matter paragraph?
A paragraph in auditor's report that refers to a matter appropriately
presented or disclosed in the financial statements that, in the auditor's
judgment, is of such importance that it is fundamental to users'
understanding of the financial statements
Jelaskan mengapa laporan auditor penting bagi pengguna laporan keuangan
dan mengapa memerlukan pemakaian kata-kata standar dalam perlaporan
opini auditor.
Laporan auditor penting bagi pengguna laporan keuangan karena laporan
tersebut menginformasikan pendapat auditor kepada pengguna tentang
apakah laporan keuangan telah disajikan secara wajar atau tidak atau
apakah tidak ada kesimpulan yang dapat dibuat sehubungan dengan
kewajaran penyajiannya. Pengguna terutama mencari setiap penyimpangan
dari kata-kata dari laporan standar yang tidak dimodifikasi dan alasan serta
implikasi dari penyimpangan tersebut. Memiliki kata-kata standar
meningkatkan komunikasi untuk kepentingan pengguna laporan auditor.
Ketika ada penyimpangan dari kata-kata standar, pengguna lebih mungkin
untuk mengenali dan mempertimbangkan situasi yang memerlukan
modifikasi atau kualifikasi terhadap laporan atau opini auditor.
1. Jelaskan mengapa laporan auditor penting bagi pengguna laporan keuangan
dan mengapa diinginkan untuk memiliki kata-kata standar
Laporan auditor meningkatkan kepercayaan terhadap laporan keuangan.
Kata-kata yang baku membuat lebih mudah/seragam untuk dipahami.
Jawaban panjang:
Laporan auditor penting bagi pengguna laporan keuangan karena laporan
tersebut menginformasikan pendapat auditor kepada pengguna tentang
apakah laporan tersebut disajikan secara wajar atau tidak atau apakah tidak
ada kesimpulan yang dapat dibuat sehubungan dengan kewajaran
penyajiannya. Pengguna terutama mencari setiap penyimpangan dari kata-
kata dari laporan wajar tanpa pengecualian standar dan alasan serta
implikasi dari penyimpangan tersebut. Memiliki kata-kata standar
meningkatkan komunikasi untuk kepentingan pengguna laporan auditor.
Ketika ada penyimpangan dari kata-kata standar, pengguna lebih mungkin
untuk mengenali dan mempertimbangkan situasi yang memerlukan
modifikasi atau kualifikasi terhadap laporan atau opini auditor.
Bagaimana pendapat auditor berbeda antara batasan ruang lingkup yang
disebabkan oleh batasan klien dan batasan yang diakibatkan oleh kondisi di luar
kendali klien? Di bawah mana dari dua ini auditor akan paling mungkin untuk
mengeluarkan pendapat tidak memberikan pendapat? Menjelaskan.
Opini auditor dapat dikualifikasikan oleh batasan ruang lingkup yang
disebabkan oleh batasan klien atau oleh batasan yang diakibatkan oleh
kondisi di luar kendali klien. Yang pertama terjadi ketika klien tidak akan,
misalnya, mengizinkan auditor untuk mengkonfirmasi piutang material atau
secara fisik mengamati persediaan. Yang terakhir dapat terjadi ketika
perikatan tidak disetujui sampai setelah akhir tahun klien ketika tidak
mungkin untuk secara fisik mengamati persediaan atau mengkonfirmasi
piutang.
Pernyataan tidak memberikan pendapat diberikan jika batasan ruang
lingkup sangat material sehingga auditor tidak dapat menentukan apakah
laporan keuangan secara keseluruhan telah disajikan secara wajar. Jika
pembatasan ruang lingkup disebabkan oleh pembatasan klien, auditor
harus menyadari bahwa alasan pembatasan tersebut mungkin untuk
menipu auditor. Untuk alasan ini, penafian lebih mungkin untuk
pembatasan klien daripada untuk kondisi di luar kendali siapa pun.
Ketika ada batasan ruang lingkup yang mengakibatkan kegagalan untuk
memverifikasi akun yang material, tetapi tidak pervasif, opini wajar dengan
pengecualian dapat dikeluarkan. Ini lebih mungkin ketika batasan ruang
lingkup adalah untuk kondisi di luar kendali klien daripada pembatasan oleh
klien.
Apa yang dimaksud dengan batasan ruang lingkup?
Pembatasan ruang lingkup adalah pembatasan audit yang disebabkan oleh
klien, masalah di luar kendali klien, atau peristiwa lain yang tidak
memungkinkan auditor untuk menyelesaikan semua aspek prosedur
auditnya.
Contoh peristiwa yang menyebabkan pembatasan ruang lingkup adalah
hilangnya bukti yang relevan dan pembatasan klien pada kontak dengan
pelanggan untuk mengkonfirmasi keberadaan piutang.
Apa tujuan paragraf opini dalam laporan auditor? Identifikasi informasi
terpenting yang termasuk dalam paragraf opini
Maksud dari paragraf opini adalah untuk menyatakan kesimpulan auditor
berdasarkan hasil bukti audit. Informasi terpenting dalam paragraf opini
meliputi:
1. Kata-kata “menurut kami” yang menunjukkan bahwa kesimpulannya
adalah berdasarkan pertimbangan profesional.
2. Pernyataan tentang apakah laporan keuangan telah disajikan secara
wajar dan sesuai dengan prinsip akuntansi yang berlaku umum bersama
dengan indikasi tahun fiskal yang terkait dengan laporan tersebut.
2. Apa tujuan paragraf opini dalam laporan auditor?
Identifikasi informasi terpenting yang termasuk dalam paragraf opini.
Maksud dari paragraf opini adalah untuk menyatakan kesimpulan auditor
berdasarkan hasil bukti audit. Informasi terpenting dalam paragraf opini
meliputi:
1. Kata-kata "menurut pendapat kami" yang menunjukkan bahwa
kesimpulan didasarkan pada penilaian profesional.
2. Penyajian kembali laporan keuangan yang telah diaudit dan tanggalnya
atau referensi ke paragraf pengantar.
3. Pernyataan tentang apakah laporan keuangan telah disajikan secara
wajar dan sesuai dengan prinsip akuntansi yang berlaku umum.
Definisikan materialitas seperti yang digunakan dalam pelaporan audit. Kondisi
apa yang akan mempengaruhi penentuan materialitas oleh auditor?
Definisi umum dari materialitas yang berlaku untuk akuntansi dan, oleh
karena itu, untuk pelaporan audit adalah:
Salah saji dalam laporan keuangan dapat dianggap material jika
pengetahuan tentang salah saji tersebut akan mempengaruhi keputusan
pengguna laporan yang wajar.
Kondisi yang mempengaruhi penentuan materialitas oleh auditor meliputi:
Potensi pengguna laporan keuangan
Jumlah dolar dari item berikut: laba bersih sebelum pajak, total aset, aset
lancar, kewajiban lancar, dan ekuitas pemilik
Sifat salah saji yang potensial—salah saji tertentu, seperti penipuan,
mungkin lebih penting bagi pengguna laporan keuangan daripada salah saji
lainnya.