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Auditing and Attestation/Blueprint/4.A

Reports on financial statement audits

Area 4: Forming Conclusions and Reporting (10-20%)

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Topics

  • Unmodified opinion
  • Key audit matters

Lessons

  • Audit Reports

Study Frameworks

The Audit Process

Audit Engagement
Pre-Engagement
Client acceptance/continuance
Engagement letter
Independence assessment
Planning
Understand entity & environment
Assess risks of material misstatement
Determine materiality
Develop audit strategy
Fieldwork
Test controls (if relying)
Substantive procedures
Audit sampling
Evaluate evidence
Completion & Reporting
Evaluate misstatements
Subsequent events review
Management representations
Issue audit report

Types of Audit Reports

Audit Report Types
Unmodified Opinion
Standard (clean) report
Emphasis-of-Matter paragraph
Other-Matter paragraph
Modified Opinions
Qualified — except for
Adverse — material & pervasive
Disclaimer — unable to obtain evidence

Audit Opinion Selection

Are the financial statements free of material misstatement?
Yes
Is the auditor free from scope limitations?
Yes
Unmodified (clean) opinion
No
Is the scope limitation pervasive?
Yes
Disclaimer of opinion
No
Qualified opinion (scope limitation)
No
Is the misstatement pervasive to the financial statements?
Yes
Adverse opinion
No
Qualified opinion (misstatement)

Going Concern Reporting

Do conditions or events raise substantial doubt about going concern?
Yes
Are management's plans to mitigate the conditions feasible?
Yes
Is substantial doubt alleviated by the plans?
Yes
No modification needed (consider adequacy of disclosure)
No
Has the entity adequately disclosed the going concern uncertainty?
Yes
Unmodified opinion with emphasis-of-matter paragraph
No
Qualified or adverse opinion (GAAP departure)
No
Has the entity adequately disclosed the going concern uncertainty?
Yes
Unmodified opinion with emphasis-of-matter paragraph
No
Qualified or adverse opinion (GAAP departure)
No
No going concern reporting required
CAMCommunicated to audit committee, Accounts/disclosures are material, Matter involved challenging judgment

The three criteria for Critical Audit Matters in PCAOB reports. All three must be met for a matter to be reported as a CAM.

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