1. 9.401 Auditing Chapter 2 Audit Reports

2. Association Must determine whether an accountant is associated with financial statements Must determine whether an accountant is associated with financial statements As a PA you are associated with financial statements when: As a PA you are associated with financial statements when:  you have consented to the use of your name in connection with the statements or  you have prepared or performed some other services with respect to the statements even if your name is not used in any written report.

3. Association with Financial Statements (FS) CICA handbook Section 5020 CICA handbook Section 5020 The concept of association is far reaching The concept of association is far reaching  FS are on PA’s letterhead  FS result from computer bookkeeping services  A document containing FS identifies an accountant as the PA

4. Association with Financial Statements (FS) If PA is associated with f/s, this creates an obligation on his/her part: If PA is associated with f/s, this creates an obligation on his/her part:  understanding of level of assurance provided  engagement letter  perform work to standard expected  communicate clearly level of assurance provided

5. Auditor’s Report - Introductory AUDITOR'S REPORT To the Shareholders of.................... I have audited the balance sheet of.......... as at.........., 19..... and the statements of income, retained earnings and changes in financial position for the year then ended. These financial statements are the responsibility of the company's management. My responsibility is to express an opinion on these financial statements based on my audit. Title Address of Client Notice of Audit Identify FS Management Responsibility Auditor Responsibility

6. Audit report - paragraph2 I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Description of the audit No special mention of consistency

7. Audit report - Opinion paragraph In my opinion, these financial statements present fairly, in all material respects, the financial position of the company as at.........., 19..... and the results of its operations and the changes in its financial position for the year then ended in accordance with generally accepted accounting principles. City(signed)................ DateCHARTERED ACCOUNTANT Opinion on financial statements Refer to GAAP Signature Date

8. Reservation in the Standard Unqualified Report Two reasons for qualifications in reports: Two reasons for qualifications in reports:  financial statements contain a departure from GAAP including inadequate disclosure  scope limitation (extent of audit work has been limited) inability to obtain sufficient evidence

9. Audit Report Reservations GAAP Departure Reports GAAP Departure Reports GAAP Departure Reports GAAP Departure Reports  reservation paragraph and “except for” opinion  rare in published reports because legislation requires statements in accordance with GAAP Super Material GAAP Departure Super Material GAAP Departure Super Material GAAP Departure Super Material GAAP Departure  more material or “so significant that they overshadow the financial statements”  pervasive, affecting numerous accounts and financial statement relationships  Adverse opinion “do not present fairly..”

10. Audit Report Reservations Scope Limitation Reports Scope Limitation Reports  eg. Management’s deliberate refusal to let auditors perform some procedures  eg. Circumstances, such as late appointment of auditor, in which procedures cannot be performed late appointment of auditorlate appointment of auditor  Qualified opinion “except for ”  Denial of opinion “I am unable to express an opinion….” if extremely material or pervasive  be wary of fraud implications!

11. Unqualified Opinion with Explanation or Modification Emphasis Paragraph Emphasis Paragraph  Auditors may opt to add additional information to the report in a emphasis of a matter paragraph Unqualified opinion but with basis of accounting other than GAAP Unqualified opinion but with basis of accounting other than GAAP  may use non GAAP if disclosure is improved  alternative basis must be clearly explained

12. Unqualified Opinion with Explanation or Modification Emphasis Paragraph Emphasis Paragraph  May include this for:  information required by statute  unaudited comparative figures  comparative figures reported on by other auditors  foreign reporting requirements  going concern issues if following international standards  DO NOT Include this for:  consistency if disclosed in accordance with GAAP  going concern or contingencies if disclosed in accordance with GAAP

13. Re-cap