Audit Final Audit Reports
The client's financial statements present fairly, in all material respects. However, the client changed inventory valuation to LIFO in the current year. They had previously valued inventory using FIFO. You should issue a a) standard report b) standard report with an Emphasis-of-Matter paragraph c) unmodified opinion and explain the change in a Basis for Opinion paragraph d) unmodified opinion and explain the change in an Emphasis-of-Matter paragraph e) qualified opinion and explain the change in a Basis for Opinion paragraph
unmodified opinion and explain the change in an Emphasis-of-Matter paragraph
The client's financial statements present fairly. Due to recurring operating losses, you doubt whether the company will be able to continue operations or meet its obligations for a reasonable time. You should issue a
unmodified opinion and explain your concern in an Emphasis-of-Matter paragraph
AUDIT REPORTS Because of pervasive errors, the client's financial statements do not conform to GAAP. 1. Which audit report would you issue? 2. Would you modify the 1st sentence of the introductory paragraph? If so describe the modifications. 3. Would you modify the auditor's responsibility section. If so, are the modifications minor or major? 4. Would you modify the opinion paragraph. If so describe the modifications. 5. Would you include any explanatory paragraph(s). If so where would the additional paragraph be located?
1. Adverse 2. No 3. Yes, minor 4. Yes, The financial statements do not present fairly 5. Yes, before the Opinion paragraph
AUDIT REPORTS You are unable to obtain sufficient evidence to support an opinion and therefore unable to complete your audit. 1. Which audit report would you issue? 2. Would you modify the 1st sentence of the introductory paragraph? If so describe the modifications. 3. Would you modify the auditor's responsibility section. If so, are the modifications minor or major? 4. Would you modify the opinion paragraph. If so describe the modifications. 5. Would you include any explanatory paragraph(s). If so where would the additional paragraph be located?
1. Disclaimer of Opinion 2. Yes, We were engaged to audit the financial statements 3. Yes, Major 4. Yes, We do not express an opinion on these financial statements 5. Yes, before the opinion paragraph
AUDIT APPROACHES Please do not abbreviate the audit approaches in the first reference. You may abbreviate if you refer to an approach more than once. 1. Under which approach are auditors required to obtain an understanding of the internal controls? 2. Under which approach are auditors required to obtain sufficient appropriate evidence?
1. We are required to obtain an understanding of the internal controls under both the reduced level of control risk approach and the primarily substantive approach. 2. We are required to obtain sufficient appropriate evidence under both the reduced level of control risk approach and the primarily substantive approach.
If the client's financial statements contain a material misstatement which is pervasive to the financial statements as a whole, you should issue
Adverse Opinion
In the Independent Auditor's Report, the Opinion Paragraph begins "In our opinion, because of the significance of the matter described in the Basis for Opinion paragraph, the financial statements referred do not present fairly, ... Which report are you issuing?
Adverse Opinion
Which audit report is illustrated below and what is the nature of the problem, if any? Report on the Consolidated Financial Statements1 We have audited the accompanying consolidated financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse audit opinion. Basis for Adverse Opinion As described in Note X, the Company has not consolidated the financial statements of subsidiary XYZ Company that it acquired during 20X1 because it has not yet been able to ascertain the fair values of certain of the subsidiary's material assets and liabilities at the acquisition date. This investment is therefore accounted for on a cost basis by the Company. Under accounting principles generally accepted in the United States of America, the subsidiary should have been consolidated because it is controlled by the Company. Had XYZ Company been consolidated, many elements in the accompanying consolidated financial statements would have been materially affected. The effects on the consolidated financial statements of the failure to consolidate have not been determined. XXXXXX In our opinion, because of the significance of the matter discussed in the above paragraph, the financial statements referred to above do not present fairly the financial position of ABC Company as of December 31, 20X1, or the results of their operations or their cash flows for the year then ended. ______ audit report accounting issue or auditing issue?
Adverse Opinion Accounting Issue
AUDIT REPORTS: From the portions of the audit report listed below please tell me what type of report is being issued? the nature of the issue NO ISSUE CONSISTENCY INSUFFICIENT EVIDENCE MISSTATEMENT GOING CONCERN We have audited the accompanying financial statements of ABC Company which comprise the balance sheet as of December 31, 2014, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our Basis for ?????????? As described in Note X, the Company has not consolidated the financial statements of subsidiary XYZ Company that it acquired during 20X1 because it has not yet been able to ascertain the fair values of certain of the subsidiary's material assets and liabilities at the acquisition date. This investment is therefore accounted for on a cost basis by the Company. Had XYZ Company been consolidated, many elements in the accompanying consolidated financial statements would have been materially affected. ???????? Opinion In our opinion, because of the significance of the matter discussed in the Basis for Opinion paragraph, the financial statements referred to above do not present fairly the financial position of ABC Company as of December 31, 2017, or the results of their operations or their cash flows for the year then ended.
Adverse Opinion Misstatement
AUDIT REPORTS: What type of report would you issue if you believe the client's financial statements contains a material misstatement? The misstatement is very material it cannot be compartmentalized because it is pervasive. what type of report would you issue ? would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Auditor's Responsibility section? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need an Basis for Opinion paragraph, where would it be placed? before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph, where would it be placed? before after
Adverse Opinion No No Yes Yes Yes Before
30. REPORTING Based on your procedures, you find significant evidence that the costs used to value inventory are materially misstated. Which report will you issue if the effects of the misstatements are pervasive and the client refuses to correct their financial statements. what type of report would you issue ? would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Auditor's Responsibility section? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need an Basis for Opinion paragraph, where would it be placed? before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph, where would it be placed? before after
Adverse Opinion No No Yes Yes Yes Before No
If the client's financial statements contain a material misstatement you should select between an
Adverse or Qualified opinion
From which section in the Independent Auditor's Report would the following statements have been copied? "(auditing) standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement."
Auditor's Responsibility
From which section in the Independent Auditor's Report would the following statements have been copied? "Our responsibility is to express an opinion of these financial statements based on our audit"
Auditor's Responsibility
From which section in the Independent Auditor's Report would the following statements have been copied? "We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion."
Auditor's Responsibility
From which section in the Independent Auditor's Report would the following statements have been copied? "auditing standards generally accepted in the United States of America"
Auditor's Responsibility
From which section in the Independent Auditor's Report would the following statements have been copied? ...auditing standards generally accepted in the United States of America
Auditor's Responsibility
In the Independent Auditor's Report, the Opinion Paragraph begins "Because of the significance of the matter discussed in the Basis for Opinion paragraph, we have not been able to obtain sufficient audit evidence ... Which report are you issuing?
Disclaimer Of Opinion
You accepted the engagement in July and are therefore unable to observe beginning inventory as required by auditing standards. The beginning inventory balance was highly material and the client has not taken a physical inventory for several years.
Disclaimer Of Opinion
AUDIT REPORTS: From the portions of the audit report listed below please tell me what type of report is being issued? the nature of the issue NO ISSUE CONSISTENCY INSUFFICIENT EVIDENCE MISSTATEMENT GOING CONCERN We were engaged to audit the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 2014, and the related statements of Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with auditing standards generally accepted in the United States of America. Because of the matter described in the Basis for Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for ?????? an a Basis for ????????? Disclaimer of Opinion The Company's investment in XYZ Company, a joint venture, is carried at $XXX on the Company's balance sheet, which represents over 90 percent of the Company's net assets as of December 31, 20X1. We were not allowed access to the management and the auditors of XYZ Company. As a result, we were unable to determine whether any adjustments were necessary relating to the Company's proportional share of XYZ Company's assets that it controls jointly, its proportional share of XYZ Company's liabilities for which it is jointly responsible, its proportional share of XYZ Company's income and expenses for the year, and the elements making up the statements of changes in stockholders' equity and cash flows. ??????? Opinion Because of the significance of the matter described in the Basis for Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements.
Disclaimer Of Opinion Insufficient Evidence
If the scope of the audit is restricted by the client or some other conditions, you should select between an
Disclaimer Or Qualified Opinion
The client restricted the scope of your audit and prevented you from performing several procedures required by auditing standards. Therefore, you were unable to obtain sufficient evidence. The accounts involved are very material and would have a pervasive effect on the financial statement. What report will you issue?
Disclaimer of Opinion
From which section in the Independent Auditor's Report would the following statements have been copied? "We have audited the accompanying financial statement of MMC, ..."
Introduction
From which section in the Independent Auditor's Report would the following statements have been copied? We have audited the accompanying financial statements of MMC, ...
Introduction
From which section in the Independent Auditor's Report would the following statements have been copied? "... responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America"
Management's Responsibility For The Financial Statements
From which section in the Independent Auditor's Report would the following statements have been copied? "... the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements"
Management's Responsibility For The Financial Statements
From which section in the Independent Auditor's Report would the following statements have been copied? ... responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America.
Management's Responsibility For The Financial Statements
From which section in the Independent Auditor's Report would the following statements have been copied? ... the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements
Management's Responsibility For The Financial Statements
From which section in the Independent Auditor's Report would the following statements have been copied? "...financial position of MMC as of December 31, 20XX, and the results of operations and its cash flows for the year then ended."
Opinion
From which section in the Independent Auditor's Report would the following statements have been copied? "...present fairly, in all material respects,"
Opinion
From which section in the Independent Auditor's Report would the following statements have been copied? present fairly, in all material respects, the financial position of MMC as of December 31, 2017, and the results of operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Opinion
INSUFFICIENT EVIDENCE: Which audit report will you issue if you are unable to obtain sufficient appropriate evidence? . would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need an Basis for Opinion paragraph, before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph? before after
Qualified No No Yes Yes Yes Before No Disclaimer Of Opinion Yes No Yes Yes Before No
AUDIT REPORTS: From the portions of the audit report listed below please tell me what type of report is being issued? the nature of the issue NO ISSUE CONSISTENCY INSUFFICIENT EVIDENCE MISSTATEMENT GOING CONCERN We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 2014, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our ?????????? qualified audit Basis for ??????? Qualified Opinion The Company has stated inventories at cost in the accompanying balance sheets. Accounting principles generally accepted in the United States of America require inventories to be stated at the lower of cost or market. If the Company stated inventories at the lower of cost or market, a write down of $XXX and $XXX would have been required as of December 31, 20X1 and 20X0, respectively. Accordingly, cost of sales would have been increased by $XXX and $XXX, and net income, income taxes, and stockholders' equity would have been reduced by $XXX, $XXX, and $XXX, and $XXX, $XXX, and $XXX, as of and for the years ended December 31, 20X1 and 20X0, respectively. ???????????? Opinion In our opinion, except for the effects of the matter described in the Basis for Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Qualified Misstatment
If the client's financial statements contain a material misstatement which can be compartmentalized and easily explained to investors, you should issue
Qualified Opinion
You accepted the engagement in July and are therefore unable to observe beginning inventory as required by auditing standards. The beginning inventory balance was barely material and a physical inventory was completed at the beginning of the year by a team of highly competent inventory specialist.
Qualified Opinion
Which audit report is illustrated below and what is the nature of the problem, if any? Report on the Consolidated Financial Statements1 We have audited the accompanying consolidated financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse audit opinion. Basis for Adverse Opinion As described in Note X, the Company has not consolidated the financial statements of subsidiary XYZ Company that it acquired during 20X1 because it has not yet been able to ascertain the fair values of certain of the subsidiary's material assets and liabilities at the acquisition date. This investment is therefore accounted for on a cost basis by the Company. Under accounting principles generally accepted in the United States of America, the subsidiary should have been consolidated because it is controlled by the Company. Had XYZ Company been consolidated, many elements in the accompanying consolidated financial statements would have been materially affected. The effects on the consolidated financial statements of the failure to consolidate have not been determined. XXXXXX In our opinion, except for the possible effects of the matter discussed in the above paragraph, the financial statements referred to above do not present fairly the financial position of ABC Company as of December 31, 20X1, or the results of their operations or their cash flows for the year then ended. __________ audit report accounting issue or auditing issue?
Qualified Opinion Auditing Issue
AUDIT REPORTS From the portions of the audit report are list below please tell me what type of report is being issued? the nature of the problem? We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with GAAP; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with GAAS. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Opinion The Company has stated inventories at cost in the accompanying balance sheets. Accounting principles generally accepted in the United States of America require inventories to be stated at the lower of cost or market. If the Company stated inventories at the lower of cost or market, a write down of $XXX and $XXX would have been required as of December 31, 20X1 and 20X0, respectively. Accordingly, cost of sales would have been increased by $XXX and $XXX, and net income, income taxes, and stockholders' equity would have been reduced by $XXX, $XXX, and $XXX, and $XXX, $XXX, and $XXX, as of and for the years ended December 31, 20X1 and 20X0, respectively. Opinion In our opinion, except for the effects of the matter described in the Basis for Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the years then ended in accordance with GAAP.
Qualified Opinion Don't Comply With GAAP
AUDIT REPORTS: From the portions of the audit report are list below please tell me what type of report is being issued? the nature of the problem? We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with GAAP; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with GAAS. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Opinion ABC Company's investment in XYZ Company, a foreign affiliate acquired during the year and accounted for under the equity method, is carried at $XXX on the balance sheet at December 31, 20X1, and ABC Company's share of XYZ Company's net income of $XXX is included inABCCompany's net income for the year then ended.We were unable to obtain sufficient appropriate audit evidence about the carrying amount of ABC Company's investment in XYZ Company as of December 31, 20X1 and ABC Company's share of XYZ Company's net income for the year then ended because we were denied access to the financial information, management, and the auditors of XYZ Company. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. Opinion In our opinion, except for the possible effects of the matter described in the Basis for Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with GAAP.
Qualified Opinion Insufficient Evidence
AUDIT REPORTS: You accepted the engagement in the middle of the year were therefore unable to observe beginning inventory. However, the client did have a reputable service organization conduct a physical inventory observation on Jan. 1, 2017. The balance in the inventory account at the beginning of the year was only slightly larger than your threshold for materiality. what type of report would you issue ? would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Auditor's Responsibility section? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need an Basis for Opinion paragraph, where would it be placed? before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph, where would it be placed? before after
Qualified Opinion No No Yes Yes Yes Before No
In the Independent Auditor's Report, the Opinion Paragraph begins "In our opinion, except for the effects of the matter described in the Basis for Opinion paragraph, the financial statements referred to above present fairly, in all material respects ... Which report are you issuing?
Qualified Opinion - don't confirm to GAAP
After completing your audit procedures you believe accounts receivable are materially overstated. In deciding which opinion to issue, which audit reports would you select from.
Qualified Opinion Or Adverse Opinion
You are unable to perform all of the audit procedures you believe are necessary. Because of this you were unable to obtain sufficient evidence. When preparing the audit report, which audit reports would you select from?
Qualified Opinion or Disclaimer of Opinion
Based on your procedures, you find significant evidence that accounts receivable are materially overstated. Although material, the amount does not overshadow the financial statements as a whole and the error can be compartmentalized. What report will you issue?
Qualified Opinion- GAAP
In the Independent Auditor's Report, the Opinion Paragraph begins "In our opinion, except for the possible effects of the matter described in the Basis for Opinion paragraph, the financial statements referred to above present fairly, in all material respects ... Which report are you issuing?
Qualified Opinion- Scope Limitation
Reporting Standards: During your audit you do not find any instances where the accounting principles the company used differed from the accounting principles they used in the preceding year. Please indicate the opinion you would issue. If you believe it is necessary to modify your report, briefly describe where in the report you would communicate this situation to investors. what type of report would you issue? would you modify the first paragraph? yes no would you modify the management's responsibility section? yes no would you modify the auditor's responsibility section? yes no would you modify the opinion paragraph ? yes no would you add an explanatory paragraph ? yes no if you would add an explanatory paragraph, where would it be placed ? before after
Unmodified No No No No No
Based on your procedures, you find significant evidence that inventory is overstated. The amount is not material and it does not overshadow the financial statements as a whole. The error can be compartmentalized. What report will you issue?
Unmodified Opinion
If the client's financial statements present fairly, in all material respects, you should issue an
Unmodified Opinion
AUDIT REPORTS: What type of report would you issue if you believe the client's financial statements contain a misstatement? The misstatement is not material and it can be compartmentalized. what type of report would you issue ? would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Auditor's Responsibility section? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need a Basis for Opinion paragraph, where would it be placed? before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph, where would it be placed? before after
Unmodified Opinion No No No No No No
AUDIT REPORTS From the portions of the audit report are list below please tell me what type of report is being issued? the nature of the problem? We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with GAAP; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with GAAS. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with GAAP.
Unmodified Opinion No Problem
AUDIT REPORTS: From the portions of the audit report listed below please tell me what type of report is being issued? the nature of the issue NO ISSUE CONSISTENCY INSUFFICIENT EVIDENCE MISSTATEMENT GOING CONCERN We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 2013, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.2 Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our ?????????? audit ?????????? Opinion In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of ABC Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note X to the financial statements, the entity has elected to change its method of accounting for [describe accounting method change].
Unmodified Opinion- Consistency
AUDIT REPORTS: What type of report would you issue if you believe the client's financial statements are fairly presented but you also believe the client will go bankrupt within the next 12 months. what type of report would you issue ? would you modify the Introductory paragraph ? YES NO would you modify Management's Responsibility paragraph ? YES NO would you modify the Auditor's Responsibility section? YES NO would you modify the Opinion paragraph? YES NO would you add a Basis for Opinion paragraph ? YES NO if you need a Basis for Opinion paragraph, where would it be placed? before after would you add an Emphasis-of-Matter paragraph ? YES NO if you need an Emphasis-of-Matter paragraph, where would it be placed? before after
Unmodified Opinion- Going Concern No No No No No Yes After
AUDIT REPORTS: What type of opinion would you issue if you the client's financial statements contain a significant uncertainty. The uncertainty is properly disclosed in the footnotes but you believe it is necessary to further emphasize the matter. what type of report would you issue? would you modify the first paragraph? yes no would you modify the management's responsibility section? yes no would you modify the auditor's responsibility section? yes no would you modify the opinion paragraph ? yes no would you add an explanatory paragraph ? yes no if you would add an explanatory paragraph, where would it be placed ? before after
Unmodified- Emphasis Of Matter No No No No Yes After
AUDIT REPORTS: What type of opinion would you issue if you believe the client's financial statements are fairly presented but you also believe the client will go bankrupt within the next year. what type of report would you being issue? what type of report would you issue? would you modify the first paragraph? yes no would you modify the management's responsibility section? yes no would you modify the auditor's responsibility section? yes no would you modify the opinion paragraph ? yes no would you add an explanatory paragraph ? yes no if you would add an explanatory paragraph, where would it be placed ? before after
Unmodified- Going Concern No No No No Yes After
The auditor's responsibility section of the audit report states that an audit includes each of the following statements, EXCEPT a) assessing the effectiveness of the internal controls b) obtaining evidence about the amounts and disclosures in the financial statements c) evaluating the appropriateness of accounting policies used d) evaluating the reasonableness of significant accounting estimates made by management e) evaluating the reasonableness of the overall presentation of the financial statements
a) assessing the effectiveness of the internal controls
In the Independent Auditor's Report, the first sentence of the Introductory Paragraph begins "We were engaged to audit the financial statements of MMC ... Which report are you issuing?
disclaimer of opinion
