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Audit Reports

Audit Reports. Chapter 3. Phases of an Audit p. 160. Megan. Briefly What are three Standards of Field Work ?. standards of field work performance of the audit. Proper planning and supervision Sufficient understanding of the entity and its internal control to assess risk

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Audit Reports

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  1. Audit Reports Chapter 3

  2. Phases of an Audit p. 160

  3. Megan Briefly What are three Standards of Field Work ?

  4. standards of field workperformance of the audit • Proper planning and supervision • Sufficient understanding of the entity and its internal control to assess risk • Sufficient appropriate evidence

  5. Kristin B What are the three paragraphs in the independent auditors’ standard report ?

  6. Paragraphs in standard reportingthe auditor’s report • introductory • scope • opinion

  7. page 48

  8. Stefan What audit report do we issue if everything if OK ? the financial statements are fairly presented there are no material misstatements

  9. We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2009, and the related statements of income, retained earnings and cash flowsfor the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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.Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly,in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United Stated.

  10. The Book has helpful tables on page 61 page 62

  11. All Std Reports are Unqualified Opinions Not all Unqualified Opinions are Std Reports Standard Report Unqualified Opinion Everything OK Qualified Opinion or Disclaim an Opinion GAAS problem We did not comply with auditing standards (GAAS) Qualified Opinion or Adverse Opinion GAAP problem NOT fairly presented f/s do not conform to GAAP

  12. Molly State the first sentence of each paragraph.

  13. We have audited the accompanying financial statements balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flowsfor the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with GAAS auditing standards generally accepted in the United States.Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly,in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then endedin conformity with GAAP accounting principles generally accepted in the United Stated.

  14. All Std Reports are Unqualified Opinions Not all Unqualified Opinions are Std Reports Standard Report Unqualified Opinion Everything OK Qualified Opinion or Disclaim an Opinion GAAS problem We did not comply with auditing standards (GAAS) Qualified Opinion or Adverse Opinion GAAP problem NOT fairly presented f/s do not conform to GAAP

  15. Justin the company reports financial instruments using ASU 2011-04 for 2011, the current year ( Accounting Standards Update 2011-04 is an amendment regarding Fair Value Measurement) different accounting principles are used in 2011 relative to 2010 because ASU 2011-04 is new

  16. Unqualified Opinion Consistency We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United Stated. [ explanatory paragraph discussing the change in accounting principles ]

  17. Aarti What is the second standard of reporting?

  18. 2nd standard of reporting The auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period

  19. Emma Where in the independent auditor’s report do we address the second standard of reporting ? The auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period

  20. Unqualified Opinion Consistency We have audited the accompanying balance sheet ofMiller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United Stated. [ explanatory paragraph discussing the change in accounting principles ]

  21. Wan what does it imply about GAAP when the first three paragraphs of the report are not modified but there is a fourth paragraph following the opinion paragraph

  22. We Not Express an opinion Do Not Present Fairly

  23. Desiree the financial statements are fairly presented but the company will probably go bankrupt the financial statements clearly indicate the company is in trouble but…..

  24. Unqualified Opinion Going Concern We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United Stated. [ explanatory paragraph expressing doubt as to the Company’s ability to continue operating as a going concern for the next year ]

  25. Daniel the client faces a huge environmental liability they will probably incur a loss they cannot estimate the amount of the loss Although they have discussed this matter in a footnote, you wish to emphasize the matter

  26. Unqualified Opinion Emphasis of Matter We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally acceptedin the United Stated. [ explanatory paragraph discussing the liability ]

  27. We Not Express an opinion Do Not Present Fairly

  28. Rule 203 departure • Example on page 51 discusses Rule 203 Justified Departures from GAAP • Page 94 Rule 203: Rules of Conduct

  29. All Std Reports are Unqualified Opinions Not all Unqualified Opinions are Std Reports Standard Report Unqualified Opinion Everything OK Qualified Opinion or Disclaim an Opinion GAAS problem We did not comply with auditing standards (GAAS) Qualified Opinion or Adverse Opinion GAAP problem NOT fairly presented f/s do not conform to GAAP

  30. We Not Express an opinion Do Not Present Fairly

  31. Failure to comply with GAASscope limitation

  32. Nohemi Which audit reports do we choose from if there is a scope limitation insufficient evidence there is a GAAS problem

  33. Qualified • Disclaimer

  34. you are unable to perform all the auditing procedures that you would like …. because you accepted the engagement late you can not observe beginning inventory the client had an outside service organization perform a physical inventory on 1/1/11 the bank that requested the audit is aware of the situation and is comfortable with the situation

  35. Michael What opinion do we issue there is a scope limitation

  36. Scope Limitation - Qualified Opinion We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Problem Problem Problem

  37. Scope Limitation - Qualified Opinion We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. Except as discussed in the following paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. [ explanatory paragraph discussing the limitation on our ability to conduct the audit and acquire sufficient evidence ] In our opinion, except for the effects of such adjustments, if any, that might have been determined to be necessary had we been able to ……, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then endedin conformity with accounting principles generally accepted in the United Stated.

  38. Sarah you are unable to perform all the auditing procedures that you would like …. because you accepted the engagement late you can not observe beginning inventory …. inventory is very material the client hasn’t taken a physical inventory in years

  39. Scope Limitation - Disclaimer We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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. Problem Problem Problem

  40. Scope Limitation - Disclaimer We were engaged to auditthe accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. [ eliminate Scope paragraph ] [ explanatory paragraph discussing the limitation on our ability to conduct the audit and acquire sufficient evidence ] Since the Company did not …………… the scope of our work was not sufficient to to enable us to express an opinion, and we do not express an opinion on these financial statements.

  41. Independence • Ultimate scope limitation

  42. Not Independent - Disclaimer p. 60 We are not independent with respect to Miller Motor Co. and the accompanying balance sheet of as of Dec. 31, 2011 and the related statements of income, retained earnings and cash flows were not audited by us. Accordingly, we do not express an opinion or any other form of assurance on these financial statements.

  43. Departure from GAAPmisstatement

  44. Brian What opinions do we choose from if the opinion paragraph isn’t true \\ there is a GAAP problem

  45. Qualified • Adverse

  46. Thomas the company refuses to adopt ASC 605-25-25 Accounting Standards Codification 605-25-25 Revenue Recognition for Multiple-Element Arrangements They argue that the amounts are immaterial very immaterial what opinion will you issue

  47. Unqualified Opinion We have audited the accompanying balance sheet of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the related statements of income, retained earnings and cash flows for the three year then ended Dec. 31, 2011. These statements are the responsibility of the Company’s management. 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.Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to abovepresent fairly,in all material respects, the financial position of Miller Motor Co. as of Dec. 31, 2011 and 2010, and the results of its operations and cash flows for the year then endedin conformity with accounting principles generally acceptedin the United Stated.

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