| Where should an Emphasis of Matter or Other Matter paragraph be included in the auditors report? | After the Opinion and Basis of Opinion sections |
| FYI:
Define, Emphasis of Matter paragraph and what is included? | A paragraph included in the auditor’s report that is required by GAAS, or is included at the auditor’s discretion, and that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor’s professional judgment, is of such importance that it is fundamental to users’ understanding of the financial statements. |
| FYI:
Define, Other Matter paragraph and what is included? | A paragraph included in the auditor’s report that is required by GAAS, or is included at the auditor’s discretion, and that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor’s professional judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities, or the auditor’s report. |
| When is an Emphasis of Matter paragraph REQUIRED? | 1. When there is a change in accounting measurement principles (i.e., an inconsistency) the effect of which is properly accounted for and disclosed
2. When the financial statements are prepared properly in accordance with a special-purpose framework; this topic will be discussed in another lesson |
| FYI:
Other circumstances when an Emphasis of Matter paragraph can be included | (1) an uncertainty regarding the outcome of important litigation or regulatory action;
(2) a significant subsequent event;
(3) a major event or catastrophe having significant effects on the entity; or
(4) significant transactions with related parties |
| FYI:
When is an Other Matter paragraph REQUIRED? | 1. When the opinion expressed on the prior year’s financial statements is different from the opinion previously expressed (due to management’s correction of a material departure from the applicable financial reporting framework)
2. When the prior period’s financial statements were audited by a predecessor auditor whose report on those financial statements is not reissued
3. When the current period’s financial statements have been audited and the prior period’s financial statements were compiled or reviewed (discussed in later lessons related to Statements on Standards for Accounting and Review Services) and the report on the prior period’s financial statement is not reissued
4. When the prior period’s financial statements were not audited, reviewed, or compiled—The status of those financial statements should be so marked; the other-matter paragraph should state that those financial statements have not been audited, reviewed, or compiled
5. When financial statements have been presented using certain special-purpose frameworks
6. When the entity presents “supplementary information” (derived from the underlying accounting records) with the financial statements and the auditor does not issue a separate report on that supplementary information
7. When a designated accounting standard-setting body requires certain supplementary information to be reported in the financial statements—The auditor should add an other-matter paragraph to address the supplementary information
8. When a report on compliance with contractual or regulatory requirements is combined with the auditor’s report on financial statements—The auditor should add an other-matter paragraph to address those compliance issues and to restrict the distribution of the report to specified parties
9. When auditing the financial statements of an employee benefit plan subject to ERISA |
| When should an auditor add a section to address Going Concerns to an auditor's report? | When the auditor has substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time (and those uncertainties are properly disclosed)— The auditor should add a “Going Concern” section to the auditor’s report |
| What is a complied or compilation report? | A compilation is a basic summary of your company's financial statements written by a CPA using data provided by your company. Unlike a review or an audit, this method provides no assurance. There are no tests performed, and the auditor does not examine any internal controls. |
| What is a review report? | During a review performed in accordance with Statements on Standards for Accounting and Review Services
(SSARS), an accountant obtains limited assurance that material changes to the financial statements are not
necessary in order for the financial statements to be in conformity with Generally Accepted Accounting
Principles (GAAP).
The end product of a review is the CPA’s report on the accompanying financial statements. The CPA’s report
states the scope of the CPA’s work (for example, which financial statements have been reviewed) and provides
a statement that the CPA is not aware of any material modifications that should be made to the financial
statements in order for them to be in conformity with GAAP.
In performing a review, the CPA performs inquiries and analytical procedures designed to identify unusual
items or trends that may need further explanation by management. Essentially, the review is designed to
determine whether the financial statements make sense without applying audit-like procedures |
