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Audit Reports. Chapter 3 There are four types of audit reports: (1) Unqualified: Clean opinion or report تام , مطلق , خالي من التحفظات (2) Qualified متحفظ (3) Adverse رأي معاكس (4) Disclaimer امتناع عن ابداء الرأي. Parts of the Standard Unqualified Audit Report اجزاء التقرير المطلق.

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audit reports

Audit Reports

Chapter 3

There are four types of audit reports:

(1) Unqualified: Clean opinion or report تام , مطلق , خالي منالتحفظات

(2) Qualified متحفظ

(3) Adverse رأي معاكس

(4) Disclaimer امتناع عن ابداء الرأي

parts of the standard unqualified audit report
Parts of the Standard Unqualified Audit Reportاجزاء التقرير المطلق
  • Report titleعنوان التقرير
  • The title should include the word ‘independent’
  • 2. Audit report address لمن يوجة التقرير
  • To its stockholders
  • 3. Introductory paragraphفقرة المقدمة
  • It’s the first paragraph does three things
  • The CPA firm has done an audit
  • It tests the financial statements that were audited
  • States that the statements are the responsible of management
  • and the auditor’s responsibility is to express an opinion.
  • 4. Scope paragraphفقرة نطاق التدقيق
  • States that the audit is designed to obtain reasonable assurance
  • about whether the statements are free from material misstatments
parts of the standard unqualified audit report3
Parts of the Standard Unqualified Audit Reportاجزاء التقرير المطلق
  • A test base indicate that sampling was used rather than an audit
  • transactions and amounts on the statements.
  • 5. Opinion paragraphفقرة ابداء الرأي
  • states that the auditor conclusions based on the result of the
  • audit. The phrase “ in our opinion” indicates that there may be some
  • information risk associated with the financial statement, although the
  • statements have been audited.
  • 6. Name of CPA firmاسم شركة التدقيق
  • 7. Audit report dateتاريخ تقريرالتدقيق
  • the date of completion the audit work.
conditions for standard unqualified audit report
Conditions for StandardUnqualified Audit Report

1. All financial statements are included.

2. The three general standards have been

followed in all respects on the engagement.

3. Sufficient evidence has been accumulated

to conclude that the three standards of

field work have been met.

conditions for standard unqualified audit report5
Conditions for StandardUnqualified Audit Report

4. The financial statements are presented in

accordance with generally accepted

accounting principles.

5. There are no circumstances requiring the

addition of an explanatory paragraph or

modification of the wording of the report.

four categories of audit reports
Four Categories of Audit Reports

1. Standard unqualified تام , مطلق , خالي من التحفظات

2. Unqualified with explanatory paragraph

or modified wording تام مع فقرة ايضاح او كلمات معدلة

3. Qualified تقرير متحفظ

4. Adverse or disclaimer تقرير معاكس او امتناع

sarbanes oxley act
Sarbanes-Oxley Act

This Act requires the auditor of a public

company to attest to management’s

report on the effectiveness of internal

control over financial reporting.

PCAOB Auditing Standard 2 requires

the audit of internal control to be integrated

with the audit of the financial statements.

sarbanes oxley act8
Sarbanes-Oxley Act

Combined Report on Financial Statements and

Internal Control Over Financial Reporting

1. Introductory paragraph

2. Scope paragraph

3. Definition paragraph

4. Inherent limitations التقيدات المتوارثةparagraph

5. Opinion paragraph

Unqualified Report withExplanatory Paragraphfive circumstanceswhen an unqualified report withan explanatory paragraph ormodified wording is appropriate

1. Lack of consistent application of generally

accepted accounting principles

قصور في تطبيق المعايير المحاسبية بشكل ثابت

2. Substantial doubt about going concern

شك كبير حول استمرارية الشركة

3. Auditor agrees with a departure frompromulgated

تشريعات رسميةaccounting principlesفي ظروف غير طبيعية

4. Emphasis of a matter

5. Reports involving other auditors

substantial doubt about going concern
Substantial Doubt AboutGoing Concernشك مادي كبير حول استمرارية الشركة

1.Significant recurring operating losses

or working capital deficiencies.خسائر تشغيلية متكررة اوعجز مهم

في راس المال التشغيلي

2. Inability of the company to pay its

obligations as they come due.عدم مقدرة الشركة على دفع التزاماتها

عندما يحين موعد سدادها

3. Loss of major customers, the occurrence

of uninsured catastrophes.خسارة كبار العملاء, الحدث كراثة غي مؤمنة

4. Legal proceedings, legislation that might

jeopardize the entity’s ability to operate.

قضية قانونية مرفوعة ضد الشركة, تشريعات تعرض مقدرة الشركة واستمرارية التشغيل


auditor agrees with a departure from a promulgated principle
Auditor Agrees with a Departurefrom a Promulgated Principle

The auditor must be satisfied and must state

and explain, in a separate paragraph or

paragraphs in the audit report, that adheringالالتزام

to the principle would have produced a

misleading result in that situation.

emphasis of a matter
Emphasis of a Matter

Under certain circumstances, the CPA may

want to emphasize specific matters regarding

the financial statements, even though the

CPA intends to express an unqualified opinion.

تحت ظروف معينة ربما المدقق يريد ان يؤكد على حدث محدد له علاقة

بالقوائم المالية بالرغم من ان نية المدقق اصدار تقرير نظيف.

هذه الظروف مثل احداث مهمة لاحقة لتاريخ الميزانية

reports involving other auditors
Reports Involving Other Auditors

1. Make no reference in the audit report

2. Make reference in the report

(modified wording report)

3. Qualify the opinion

learning objective 5
Identify the types of audit reports

that can be issued when an

unqualified opinion is not justified.

Learning Objective 5
departures from an unqualified opinion
Departures from AnUnqualified Opinion

1. Scope limitation

2. GAAP departure

3. Auditor not independent

qualified opinion
Qualified Opinionالرأي المتحفظ

A qualified opinion report can result from

(1) a limitation on the scope of the audit or

(2) failure to follow generally accepted

accounting principles.

The auditor use ‘ except for’ in the opinion paragraph

The scope of the audit has been restricted, When the auditor

has not accumulated sufficient evidence

To conclude whether financial statement are stated in

Accordance of GAAP

نطاق او مجال التدقيق مقيد من قبل الشركة او ظروف اخرى, عندما لايستطيع المدقق تجميع

ادلة كافي لتكوين رأي فيما اذا القوائم المالية تم اعدادها وفق المعايير المحاسبية المتعارف عليها.

adverse opinion
Adverse Opinion رأي معاكس

It is used only when the auditor believes

that the overall financial statements are

so materially misstatedتحريف مادي or misleading

thatthey do not present fairly the financial

position or results of operations and cash

flows in conformity طبقا لwith GAAP.

يستخدم عندما يعتقد المدقق ان هناك تحريف مادي او تظليل ادى الى عدم عرض

المركز المالي ونتيجة عمليات الشركة بشكل عادل. كما انها لم تعرض التدفق النقدي

بشكل يتفق مع المبادىء المحاسبية المتعارف عليها

disclaimer of opinion
Disclaimer of Opinion امتناع عن ابداء الرأي

It is issued when the auditor is unable غير قادر

to be satisfied that the overall financial

statements are fairly presented.

The adverse opinion report can ariseينشأ only when the

Auditor has knowledge, after an adequate investigation,

Of the absence of conformity.

how materiality affects audit reporting decisions materiality
how materiality affectsaudit reporting decisions?Materiality تعريف المادية

A misstatement التحريفin the financial

Statementscan be considered material if

knowledge ofthe misstatement would affect

a decisionof a reasonable user of

the statements.

levels of materiality
Levels of Materiality

Amounts are immaterial.المقاديير المحرفة غير مادية

Amounts are material but do not overshadow لايلقي بتاثيرة

the financial statements as a whole.

Amounts are so material or so pervasiveيتغلغل, يعم that

overall fairness of the statements is in question.

relationship of materiality to type of opinion
Relationship of Materiality toType of Opinion



Significance in Terms of

Reasonable Users’ Decisions

Type of



Users’ decisions are unlikely

to be affected.



Users’ decisions are likely

to be affected.




Users’ decisions are likely

to be significantly affected.


or adverse

discussion of conditions requiring departure
Discussion of ConditionsRequiring Departure
  • Auditor’s scope has been restricted
  • Statements are not in conformity with GAAP
  • Auditor is not independent
auditor s decision process
Auditor’s Decision Process

Determine whether any condition exists

requiring a departure from a standard

unqualified report.

  • Decide the materiality for each condition
  • Decide the appropriate type of report
  • Write the audit report
more than one condition requiring a departure or modification
More Than One Condition Requiringa Departure or Modification

The auditor is not independent.

There is a scope limitation.

There is a substantial doubt about

the company’s ability to continue

as a going concern.

There is a deviation in the statements’

preparation in accordance to GAAP.

number of paragraphs in the report
Number of Paragraphsin the Report

Type of Report

Standard unqualified 3

Unqualified with explanatory paragraph 4

Unqualified shared report with other auditors 3

Qualified – opinion only 4

Qualified – scope and opinion 4

Disclaimer – scope limitation 3

Adverse 4