| How many days does an auditor have under AICPA standards to complete the final audit report and make any revisions to that report? | The auditor should complete the assembly of the final audit file no later than 60 days after the report release date.
The PCAOB specifies a limit of 45 days for audits of public companies. |
| What are the retention days required for the final audit file under AICPA and PCAOB? | AICPA = 5 years
PCAOB = 7 years |
| To Know:
One of the major differences between the PCAOB risk-assessment standards and those of the AICPA is that the PCAOB standards identify 5 financial statement assertions, whereas the AICPA standards focus on a total of 12 assertions in 2 broad categories. <transactions ending balances & transactions during the period> | To Know:
One of the major differences between the PCAOB risk-assessment standards and those of the AICPA is that the PCAOB standards identify 5 financial statement assertions, whereas the AICPA standards focus on a total of 12 assertions in 2 broad categories. <transactions ending balances & transactions during the period> |
| The auditor's usual unmodified report has four primary sections (in order) along with a signature block, what are the sections? | 1. Opinion (2 paragraphs)
2. Basis of Opinion (1 paragraph)
3. Management Responsibilities (2 paragraphs)
4. Auditors Responsibilities (3 paragraphs)
Signature Block |
| Audit Reports that are 'Modified', there are three, what are they? | 1. Qualified
2. Adverse
3. Disclaimer of Opinion |
| What is a 'Qualified' audit opinion? | The auditor expresses one or more reservations about (a) the financial statement presentation (due to a departure from the requirements of the applicable financial reporting framework that is material but not pervasive) or (b) the audit engagement (due to a scope limitation about a matter for which the auditor was unable to obtain desired audit evidence, the possible effect of which is material but not pervasive). |
| What is a 'Adverse' audit opinion? | The auditor states that the financial statements are not fairly stated due to one or more departures from the requirements of the applicable financial reporting framework that is/are material and pervasive. |
| What is a 'Disclaimer of Opinion' audit opinion? | The auditor does not express any conclusion about the fairness of the entity’s financial statements due to a scope limitation that is material and pervasive. |
| What are the three alternative audit reports that can be issued if an 'Unmodified' opinion is not given | 1. Unmodified audit report that includes an “emphasis-of-matter” paragraph
2. Unmodified audit report that includes an “other-matter” paragraph
3. Modified audit reports:
a. modified
b. adverse
c. disclaimer of opinion |
| Key Audit Matter, defined. | Those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated with those charged with governance. |
| Where should the 'key audit matter' report be placed in the auditors report? | Somewhere between the Opinion & Basis of Opinion section -- not a requirement though |
| Under which of the following circumstances should an auditor who has been engaged to report on key audit matters omit the “Key Audit Matters” section from the auditor’s report? | AICPA auditing standards prohibit the auditor from commenting on key audit matters when the auditor has disclaimed an opinion (or has expressed an adverse opinion) on the entity’s financial statements. |
| Under the PCAOB, what three sections are included, what are they? | 1. Opinion
2. Basis of Opinion
3. CAM (critical audit matters)
Signature Block |
| Critical Audit Matters, defined. | Any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that relates to accounts or disclosures that are material to the financial statements and involved especially challenging, subjective, or complex auditor judgment. |
| Is CAM required to be included in an auditor report where there is an Adverse and/or Disclaimer of Opinion? | No,
Such a report should not include any communication of CAMs, since the reason for the adverse opinion or disclaimer is most important. |
| Is CAM required in an Modified/UnModified auditor report? | Yes, if applicable. |
| A Qualified for Misstatement opinion, what are the two choices? | (a.) Qualified Opinion—The auditor should express a qualified opinion when the auditor concludes that misstatements are material, but not pervasive to the financial statements.
(b.) Adverse Opinion—The auditor should express an adverse opinion when the auditor concludes that misstatements are material and pervasive to the financial statements. |
| FYI:
An adverse opinion is issued when specific pervasive GAAP departure is identified.
When would an auditor be most likely to express an adverse opinion? | An adverse opinion is issued when a material and pervasive GAAP departure is present in the financial statements. If the financial statements do not conform with FASB requirements a GAAP departure is present. If considered to be of sufficient magnitude to cause the financial statements to be misleading, the auditor would issue an adverse opinion. |
| FYI:
A disclaimer is issued when the scope limitations pertaining to the audit are so pervasive that the auditor in unable to express an opinion.
Circumstances Resulting in a Scope Limitation
(1) Circumstances Beyond the Control of the Entity—For example, the entity's accounting records have been destroyed.
(2) Circumstances Related to the Nature or Timing of the Auditor's Work—For example, the auditor determines that substantive procedures alone are not sufficient and the entity's controls are ineffective; the auditor is unable to obtain audited financial statements of an investee (accounted for using the equity method); or the timing of the auditor's appointment does not permit the auditor to observe the physical counting of inventories.
(3) Limitations Imposed by Management—For example, management prevents the auditor from requesting external confirmation of certain account balances. The auditor should request that management remove any such limitation.
(a) If management refuses—The auditor should communicate the matter to those charged with governance and determine whether it is possible to perform alternative procedures to obtain sufficient appropriate audit evidence.
(b) If unable to obtain sufficient appropriate audit evidence (and if the effects could be both material and pervasive)—The auditor should withdraw from the audit (when practicable) or issue a disclaimer of opinion. | FYI:
“Auditor’s Responsibilities” section—Provide a limited description consisting of 3 sentences (without any bullet points), including a reference to the “Basis for Disclaimer of Opinion” section.
When disclaiming an opinion on the entity’s financial statements—The auditor is prohibited from including an “Other Information” section in the auditor’s report; likewise, the auditor cannot communicate key audit matters when disclaiming an opinion. |
| FYI:
Audited Summary Financial Statements -
1. An auditor should obtain a separate engagement letter
2. The auditor must have been engaged to audit the financial
statements as a whole in order to accept an engagement to
report on summary financial statements. | Only an Unmodified or Adverse Opinion is Permitted—The summary financial statements are either consistent or not consistent with the audited financial statements; accordingly, a qualified opinion is not permitted.
When the auditor's report on the audited financial statements contains an adverse opinion or a disclaimer of opinion, the auditor should either withdraw from the engagement to report on the summary financial statements (when withdrawal is possible) or disclaim an opinion on the summary financial statements. |
