Summary: X Lecture 10 Auditing (Audit Reports)

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• 1 x Lecture 10 Auditing (Audit Reports)

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• What are the four types of audits reports?

  1.Unqualified opinion report (goedkeurendadvies)
  
  modified opinion
  2.Qualified opinion report (gekwalificeerdadvies)
  3.Adverse opinion report (afkeurendadvies) 
  4.Disclaimer of opinion report (afwijzendadvies)

• What is the auditor's report?

  A formal opinion issued by either an internal auditor or an independent external auditor as a result of an internal or external audit/evaluation on a client (called an "auditee"). The report provided to users likean individual, company, a government, or even the general public as an assurance service in order for the user to make decisions based on the results of the audit.

• Which four things indicate an Unqualified Opinion?

  
  •All statements (BS, IS, changes in SE, CFS) are included in the financial statements.
  
  
  •Sufficientappropriateevidence has been accumulated& auditor was abletoperformthe audit in accordancewithauditingstandards.
  
  
  •FS are presentedaccordingtoappropriate accounting framework (GAAP). Thus, alsodisclosures are included.
  
  
  •No circumstancesthatrequireexplanatoryparagraph or modification of the report.

• What can be in the emphasis-of-matter (explanitory) paragraph?

  
  •Justifieddeparturefrom GAAP
  •Inconsistent application of GAAP
  •Substantialdoubt on going concern
  •Emphasis of othermatters
  •Reference toother auditors (groups audits, component auditors)

• 4 factors that may cause uncertainty about ability to continue as a GC:

  •Significant recurring operating losses
  •Inabilitytopayobligations in time
  •Loss of major customers, occurence of catastrophe
  •Legal proceedings

• What is Beta-risk and what is alpha-risk?

  Beta-Risk (type II error) = the auditor failed in detecting material misstatements, but at the end of the year the firm goes bankrupt due to the fact that the FS are not correct. E.g. Arthur Anderson
  Alpha-Risk (type I error) = the auditor concludes that there is a big problem in the FS, but in reality there is no problem. The firm goes on.

• What does a disclaimer of opinion report mean?

  Statement by auditors that they do not express an opinion on the financial position of a firm because (1) they have not completed an examination of its accounts, or (2) the examination is not broad enough in scope to enable them to form an opinion.

• What does a adverse opinion report mean?

  Independent auditor's written view (with supporting reasons) that the financial statements of an organization (1) do not fairly present its actual financial position, (2) are not in conformity with the provisionsGAAP and/or, (3) the requiredinformation was either not disclosed, or (if disclosed) was inadequately disclosed or was inaccurate.

• What does an integrated audit mean?

  An integrated audit combines a financial statement audit with an audit of internal control over financial reporting (ICOFR). The objective of an ICOFR audit is to obtain reasonable assurance whether any material weaknesses exist at the time management assesses its internal control over financial reporting.

• What does the Dodd-Frank Act mean for non accelerated firms?

  
  (“Dodd-Frank Act”) permanently exempts non accelerated firms from 404 SOX auditor attestation requirement (the integrated audit report)