Presentation is loading. Please wait.

Presentation is loading. Please wait.

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Chapter 3 3-1.

Published byEmery Chapman Modified over 8 years ago

Similar presentations

Presentation on theme: "Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Chapter 3 3-1."— Presentation transcript:

1 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Chapter 3 3-1

2 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-2 Describe the parts of the standard unqualified audit report for non-public entities under AICPA auditing standards. Specify the conditions required to issue the standard unqualified audit report. Understand reporting on financial statements and internal control under PCAOB auditing standards.

3 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-3 Describe the five circumstances when an unqualified report with an emphasis-of- matter explanatory paragraph or modified wording is appropriate. Identify the types of audit reports that can be issued when an unqualified opinion is not justified. Explain how materiality affects audit reporting decisions.

4 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-4 Draft appropriately modified audit reports under a variety of circumstances. Determine the appropriate audit report for a given audit situation. Understand use of international accounting and auditing standards by U.S. companies.

5 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-5 Describe the parts of the standard unqualified audit report for non-public entities under AICPA auditing standards. unqualified audit report for non-public entities under AICPA auditing standards. 1 1

6 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-6 1. Report title 2. Audit report address 3. Introductory paragraph 4. Management’s Responsibility 5. Auditor’s Responsibility 6. Opinion Paragraph 7. Name and Address of CPA firm 8. Audit report date

7 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-7

8 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Specify the conditions required to issue the standard unqualified audit report. 3-8 2 2

9 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-9 1. Includes all financial statements 2. Sufficient appropriate evidence 3. Financial statements present in accordance with U.S.GAAP 4. No circumstances require an explanatory paragraph or report modification paragraph or report modification

10 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-10

11 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Understand reporting on financial statements and internal control under PCAOB auditing standards. 3-11 3 3

12 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-12 Auditors of public companies subject to Section 404 of the Sarbanes-Oxley Act must report on the effectiveness of internal control over financial reporting. PCAOB Auditing Standard 5 requires the audit of internal control to be integrated with the audit of the financial statements.

13 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-13 Sarbanes- Oxley Sec.404 2010 Legislation Accelerated Filer Non-accelerated Filer ICFR Effectiveness Audits Permanent Exemption

14 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-14 Separate Report on Financial Statements and Internal Control Over Financial Reporting 1. Introductory paragraph 2. Scope paragraph 3. Definition paragraph 4. Inherent limitations paragraph 5. Opinion paragraph 6. Cross-Reference Paragraph

15 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-15

16 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Describe the five circumstances when an unqualified report with an emphasis-of- matter explanatory paragraph or modified wording is appropriate. 3-16 4 4

17 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-17 1. Lack of consistent application of generally accepted accounting principles 2. Substantial doubt about going concern 3. Auditor agrees with a departure from promulgated accounting principles 4. Emphasis of a matter 5. Reports involving other auditors

18 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-18 Auditors must note circumstances in which accounting principles are not consistently applied Auditor should modify the report when a material change occurs by adding an explanatory paragraph in the report

19 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-19  Significant recurring operating lossesorworking capital deficiencies.  Inability of the company to pay its obligations as they come due.  Loss of major customers, the occurrence of uninsured catastrophes.  Legal proceedings, legislation that might jeopardize the entity’s ability to operate.

20 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-20 Departure may not require a qualified or adverse opinion The auditor must separately explain in the audit report that adhering to the principle would have produced a misleading result. Circumstances are unusual

21 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-21 Under certain circumstances, the CPA may want to emphasize specific matters regarding the financial statements, even though the CPA intends to express an unqualified opinion. Financial Statement Comparability Subsequent Events Related Party Transactions Material Uncertainties

22 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 22 1.Make no reference in the audit report 2. Make reference in the report (modified wording report) 3. Qualify the opinion

23 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-23

24 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Identify the types of audit reports that can be issued when an unqualified opinion is not justified. 3-24 5 5

25 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-25 1. Scope limitation 2. GAAP departure 3. Auditor not independent

26 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-26 A qualified opinion report can result from a limitation on the scope of the audit or failure to follow generally accepted accounting principles.

27 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-27

28 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-28 Auditor believes the financial statements are not presented fairly in conformity with GAAP.

29 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-29

30 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-30 Issued when the auditor is unable to be satisfied that the overall financial statements are fairly presented. Can arise only from a lack of knowledge by the auditor.

31 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-31

32 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Explain how materiality affects audit reporting decisions. 3-32 6 6

33 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-33 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.

34 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-34 Amounts are immaterial. Amounts are material but do not overshadow the financial statements as a whole. Amounts are so material or so pervasive that overall fairness of the statements is in question.

35 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-35 Failure to follow GAAP Audit report Unqualified Qualified opinion only Adverse

36 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-36 Materiality Level Immaterial Material Highly material Significance in Terms of Reasonable Users’ Decisions Users’ decisions are unlikely to be affected. Users’ decisions are likely to be affected. Users’ decisions are likely to be significantly affected. Type of Opinion Unqualified Qualified Disclaimer or adverse

37 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-37  Dollar amount compared with a base  Measurability  Nature of the item

38 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-38 Scope limitation Audit report Unqualified Qualified scope and opinion Disclaimer

39 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Draft appropriately modified audit reports under a variety of circumstances. 3-39 7 7

40 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-40  Auditor’s scope has been restricted  Statements are not in conformity with GAAP  Auditor is not independent

41 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Determine the appropriate audit report for a given audit situation. 3-41 8 8

42 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-42 Determine whether any conditions exists requiring a departure from a standard unqualified report. Decide Materiality Decide appropriate type of report Write Audit Report

43 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-43 The auditor is not independent. There is a scope limitation. Going concern uncertainty exists. Statements are not prepared in accordance with GAAP.

44 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Understand proposed use of international accounting and auditing standards by U.S. companies. 3-44 9 9

45 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-45 Globalization of world’s capital markets are leading to calls for a single set of accounting standards to be used around the world. SEC Developing Workplan If plan is approved? 2015 Implementation of IFRS into U.S.

46 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. 3-46

47 Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Copyright All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. 3-47

Download ppt "Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall. Chapter 3 3-1."

Similar presentations

Audit Reports Chapter 3.

Audit Reports Chapter 3.
Understanding Audit Reports

Understanding Audit Reports
Chapter 11 Prepared by Richard J. Campbell Copyright 2011, Wiley and Sons Completing the Integrated Audit and Reporting.

Chapter 11 Prepared by Richard J. Campbell Copyright 2011, Wiley and Sons Completing the Integrated Audit and Reporting.
Reports on Audited Financial Statements

Reports on Audited Financial Statements
©2010 Prentice Hall Business Publishing, Auditing 13/e, Arens/Elder/Beasley 3 - 1 Audit Reports Chapter 3.

©2010 Prentice Hall Business Publishing, Auditing 13/e, Arens/Elder/Beasley Audit Reports Chapter 3.
Audit Reports Chapter 3.

Audit Reports Chapter 3.
MODERN AUDITING 7th Edition

MODERN AUDITING 7th Edition
©2005 Prentice Hall Business Publishing, Auditing and Assurance Services 10/e, Arens/Elder/Beasley 3 - 1 Audit Reports Chapter 3.

©2005 Prentice Hall Business Publishing, Auditing and Assurance Services 10/e, Arens/Elder/Beasley Audit Reports Chapter 3.
REPORTING ON AUDITED FINANCIAL STATEMENTS

REPORTING ON AUDITED FINANCIAL STATEMENTS
Chapter Two Audit Reports

Chapter Two Audit Reports
Auditors’ Reports Chapter 17 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Auditors’ Reports Chapter 17 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Auditors’ Reports. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 17-2 We have audited the accompanying balance sheet.

Auditors’ Reports. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved We have audited the accompanying balance sheet.
3 THE AUDIT REPORT WAS TIMELY, BUT AT WHAT COST?.

3 THE AUDIT REPORT WAS TIMELY, BUT AT WHAT COST?.
MODERN AUDITING 7th Edition Developed by: Dr. Raymond N. Johnson, CPA Gregory K. Lowry, MBA, CPA John Wiley & Sons, Inc. William C. Boynton California.

MODERN AUDITING 7th Edition Developed by: Dr. Raymond N. Johnson, CPA Gregory K. Lowry, MBA, CPA John Wiley & Sons, Inc. William C. Boynton California.
3 - 1 ©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder Audit Reports Chapter 3.

3 - 1 ©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder Audit Reports Chapter 3.
9.401 Auditing Chapter 2 Audit Reports. Association Must determine whether an accountant is associated with financial statements Must determine whether.

9.401 Auditing Chapter 2 Audit Reports. Association Must determine whether an accountant is associated with financial statements Must determine whether.
Filmmaker Krisztof Kieslowski

Filmmaker Krisztof Kieslowski
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & Simnett Slides prepared by Roger Simnett.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & Simnett Slides prepared by Roger Simnett.
CHAPTER 2 FINANCIAL STATEMENT AUDITS AND AUDITORS’ RESPONSIBILITIES Fall 2007 u G enerally Accepted Auditing Standards u Assurance Provided by an Audit.

CHAPTER 2 FINANCIAL STATEMENT AUDITS AND AUDITORS’ RESPONSIBILITIES Fall 2007 u G enerally Accepted Auditing Standards u Assurance Provided by an Audit.
Audit Reports - Overview

Audit Reports - Overview

Similar presentations

Ads by Google