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GENERAL STANDARDS. GENERAL STANDARDS. 1) The audit is to be performed by a person or persons have adequate technical training and proficiency as an auditor. 2) In all matters relating to the assignment an independence in mental attitude is to be maintained by the auditor(s).

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general standards2
GENERAL STANDARDS

1) The audit is to be performed by a person

or persons have adequate technical

training and proficiency as an auditor.

2) In all matters relating to the assignment

an independence in mental attitude is to

be maintained by the auditor(s).

general standards continued
GENERAL STANDARDS(continued)

3) Due professional care is to be exercised

in the performance of the audit and the

preparation of the report.

fieldwork standards
FIELDWORK STANDARDS

1) The work is to be adequately planned,

and assistants, if any, are to be properly supervised.

2) A sufficient understanding of internal

control is to be obtained to plan the audit

and to determine the nature, timing, and

extent of tests to be performed.

fieldwork standards continued
FIELDWORK STANDARDS(continued)

3) Sufficient Competent Evidential Matter

is to be obtained through inspection,

observation, inquiries, and confirmations

to afford a reasonable basis for an

opinion regarding the financial

statements under audit. (SAS #31)

reporting
REPORTING

1) The report shall state whether thefinancial statements are presented in accordance with GAAP.

2) The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.

3) Informative Disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.

reporting continued
REPORTING(continued)

4) The report shall either contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed.

3 types of opinions
3 Types of Opinions:
  • Unqualified;
  • Unqualified with explanatory paragraph;
  • Other than Unqualified.
unqualified explanatory paragraph
Unqualified – Explanatory Paragraph
  • Non-Conformity with GAAP (Enron)
  • Other Auditors
  • Inconsistent application of GAAP
  • Substantial Doubt about going concern
  • Emphasis of a matter
opinion based in part on report of other auditor
Opinion Based in parton Report of Other Auditor
  • We have audited…Our responsibility…We did not audit the financial statements of B Company, a wholly-owned subsidiary,…our opinion, insofar as it relates to the amounts included for B Company, is based solely on the report of the other auditors.
  • We conducted our audits…We believe that our audits and the report of other auditors…
  • In our opinion, based on our audits and the reports of other auditors, the financial statements…
predecessor auditor prior year
PREDECESSOR AUDITORPRIOR YEAR

We have audited the balance sheet of ABC Company… for the year then ended… The financial statements of ABC Company as of December 31, 19x1, were audited by other auditors whose report dated March 31, 19x2, expressed an unqualified opinion on those statements.

Scope Paragraph - Same as Standard Report

In our opinion, the 19x2 financial statements referred to above present fairly...

going concern
GOING CONCERN

First 3 Paragraphs - Same as Standard Report

Add Explanatory Paragraph:

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note X to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantail doubt about is ability to continue as a goincg concern. Management’s plans in regard to these matters

going concern explanatory paragraph continued
GOING CONCERNEXPLANATORY PARAGRAPH(continued)

are also described in Note X. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

lack of consistency
Lack of Consistency
  • The auditor should refer to a change in an explanatory paragraph. Such paragraph should follow the opinion paragraph. Ex:
  • As discussed in Note X to the financial statements, the Company changed its method of computing depreciation in 20X2.
other than unqualified
Other than Unqualified:
  • Qualified due to:
    • Scope limitation
    • Non-conformity with GAAP
  • Disclaimer (severe scope limitation)
  • Adverse (severe non-conformity)
  • No Opinion (lack independence)
disclaimer scope limitation
DISCLAIMERSCOPE LIMITATION

We were engaged to audit the accompanying balance sheets of X Company as of December 31, 19x2 and 19x1, and the related statements… for the years then ended. These financial statements are the responsibility of the Company’s management.

disclaimer scope limitation continued
DISCLAIMERSCOPE LIMITATION(continued)

No Scope Paragraph

The Company did nt make a count of its physical inventory… Further, evidence supporting the cost of propery & equipment… is no longer available…

Since the Company did nt take physical inventories and we were not able to apply other auditing procedures… the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on these financial statements

adverse departure from gaap
ADVERSEDEPARTURE FROM GAAP

Intro & Scope Paragraph - Same as Standard Report

As discussed in Note X to the financial statements, the Company carries its property, plant, and equipment accounts at appraised values, and provides depreciaiton on the basis of such values. Further, the Company does not provide for income taxes with respect to differences between financial income and taxable income arising from the use of, for income tax purposes, of the installment method of reporting gross profit from certain types of sales…

adverse departure from gaap continued
ADVERSE DEPARTURE FROM GAAP(continued)

In our opinion, because of the effects of the matters discussed in the preceding paragraphs, the financial statements referred to above do not present fairly, in conformity with GAAP, the financial position of X Company … , or the results of its operations or its cash flows for the years then ended.

lack of independence
Lack of Independence
  • We are not independent with respect to XYZ Company, and the accompanying balance sheet as of December 31, 20x1, and the related statements of income, retained earnings, and cash flows for the year then ended were not audited by us and, accordingly, we do not express an opinion on them.