审计学课件AuditingSeptember192011.pptVIP

Now let’s move on to new material Any questions about last class? Unqualified Report with Explanatory Paragraph Inconsistent application of GAAP. Doubt about the ability of the client to remain in business. Auditor agrees with a deviation from GAAP. To emphasize a matter. There are reports from other auditors. What affects Comparability? 1. Change in an estimate. 2. Error correction not involving principles. 3. Variations in format and presentations in financial information. 4. Changes because of substantially different transactions of events. Why would you issue any type of report besides an Unqualified Report? The client limits the scope of the audit. Departures from GAAP. You are not independent. A limitation in the scope of the audit or departures from GAAP would result in a Qualified Report. If the financial reports are so misstated or misleading as to present a distorted picture of the company the auditor should issue an Adverse Report . If the auditor isn’t satisfied that the financial statements are not fairly presently he should issue a Disclaimer of Opinion. What affects Consistency and requires an Explanatory Paragraph Changes in accounting principles Changes in reporting entities Correction of errors involving principles When is the paragraph necessary? Only if the changes are material! What is considered “material” in the financial statements? If the misstatement would mislead a reasonable user of the report to make a decision that would not fairly represent his objectives it would be considered a material misrepresentation. Relationship of Materiality toType of Opinion Materiality Level Significance in Terms of Reasonable Users’ Decisions Type of Opinion Users’ decisions are unlikely to be affected. Immaterial Unqualified Users’ decisions are likely to be affected. Material Qualified Users’ decisions are likely to be significantly affected. Highly material Disclaimer or adverse Materiality Decisions Failure to follow GAAP Audit report Unqu