Sei sulla pagina 1di 12

10/20/2015

Reports on Audited Financial


Statements
The television industry doesnt like to see
the complexity of the world. It prefers
simple reporting, with simple ideas: this is
white, thats black; this is good, thats
bad.
Filmmaker Krisztof Kieslowski
1

Reports on Audited Financial Statements


In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Enron Corp. and subsidiaries as
of December 31, 2000 and 1999, and the results of
their operations, cash flows, and changes in
shareholders equity for each of the three years in
the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the
United States.
The opinion paragraph from Arthur Andersens final
audit of Enron Corp. (dated February 23, 2001)
2

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

10/20/2015

Reports Accompanying Financial Statements


Prepared by Auditor
o Opinion on financial statements and related
disclosures: Are F/S presented per applicable
financial reporting framework (GAAP)?
o Opinion on internal control over financial
reporting: Is I/C effective?
Prepared by Management
o Opinion on internal control over financial
reporting: Is I/C effective?

The Purpose of the Auditors Report


Are F/S in conformity with GAAP?
o Provide indication of what the F/S would be like
if GAAP were followed
o Provide any entity-omitted disclosures
Any unusual aspects of the audit examination?
o Scope limitations
o Division of responsibility
Any unusual matters related to the entity?
o Going-concern uncertainty
o Consistency
o Emphasis of a matter
5

Types of Auditors Reports


1. Standard report
Expresses an unqualified opinion
2. Unqualified opinion with modified wording
F/S are in conformity with GAAP
Additional matters are disclosed in report
3. Qualified opinion
Except for some matter, F/S are in
conformity with GAAP
4. Adverse opinion
F/S are not in conformity with GAAP
5. Disclaimer of opinion
No opinion is issued by auditors
6

10/20/2015

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

The Standard Report (Paragraphs)


Introductory
o F/S and years examined
o Responsibility of auditors and management

Scope
o Audit conducted in accordance with PCAOB standards
o Description of an audit (specific references to test basis,
materiality, and significant estimates)
o Audit provides reasonable assurance

Opinion
o Are F/S presented in conformity with applicable financial
reporting framework (GAAP)?

Internal Control
o References examination, report, and opinion on internal
control
8

The Standard Report (Other Elements)


1. Title includes the word independent
2. Addressed to the client (normally, shareholders
and board)
3. Dated when auditors have obtained sufficient
appropriate evidence (date of the auditors
report)
4. Signed by the accounting firm

10/20/2015

Independent Auditors Report (AS 5)


Report of Independent Registered Public Accounting Firm

Report Title
Report Address

To the Board of Directors and Shareholders


DUNDER-MIFFLIN, INC.

Introductory Paragraph

Scope Paragraph

Opinion Paragraph

We have audited the accompanying balance sheets of DUNDER-MIFFLIN, INC. as of December 31, 2012 and
2011, and the related statements of income, shareholders equity, and cash flows for each of the years in the
three-year period ended December 31, 2012. These financial statements are the responsibility of DUNDERMIFFLIN, INC.'s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(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 DUNDER-MIFFLIN, INC. as of December 31, 2012 and 2011, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with
accounting principles generally accepted in the United States of America.

Internal Control
Paragraph

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), DUNDER-MIFFLIN, INC.S internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated January 29, 2012 expressed an
unqualified opinion thereon.

Signature

Michael Scarn, LLP


Scranton, PA

Report Date

January 29, 2013

10

Reports on Internal Control


Options
o Separate reports on F/S and I/C, with each
reports referencing the other
o Combined report on F/S and I/C

11

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

12

10/20/2015

Departures from GAAP

Is the
Departure
Material?

NO

Standard Report
(Unqualified
Opinion)

YES
NO
Is the
Departure
Pervasive?

Qualified
Opinion

YES

Adverse
Opinion

13

Qualified Opinion
Issued when departure is material, yet not
pervasive
Report Modifications:
o Introductory and scope paragraphs remain the
same
o Add paragraph preceding the opinion paragraph
explaining departure and detailing $ amounts
involved
o Modify opinion paragraph (In our opinion,
except for the matter discussed in the
preceding paragraph,.)
14

Adverse Opinion
Issued when F/S do not present fairly according
to GAAP (i.e., a serious, pervasive departure from
GAAP).
Report Modifications:
o Introductory and scope paragraphs remain the
same
o Add paragraph preceding the opinion
paragraph explaining the departure and
detailing $ amounts involved
o Change opinion paragraph (financial
statements do not present fairly)
15

10/20/2015

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

16

Scope Limitations
Is the
Limitation
Material?

NO

Standard Report
(Unqualified
Opinion)

Alternative
Procedures
Available?

YES

Standard Report
(Unqualified
Opinion)

NO

Qualified
Opinion

YES

NO
Is the
Limitation
Pervasive?

YES
Disclaimer of
Opinion
17

Type of Scope Limitations


Circumstance-Imposed
o Situation in which matters beyond auditors and
clients control limit procedures performed by
auditor
o Example: inability to observe year-end
inventory because of late appointment
Client-Imposed
o Situation in which client specifically limits
auditors procedures
o Should be viewed as a significant restriction
and a disclaimer is ordinarily issued
18

10/20/2015

Scope Limitation: Qualified Opinion


Issued when scope limitations are material, but
not pervasive
Report Modifications:
o Introductory paragraph remains the same
o Scope paragraph: Except as discussed in
the following paragraph [the scope limitation],
we conducted our audit
o Add paragraph preceding the opinion
paragraph describing the scope limitation
o Modify opinion paragraph (In our opinion,
except for)
19

Scope Limitation: Disclaimer of Opinion

20

Pervasive scope limitation, usually client-imposed


o Significance of the limitation is such that auditors
cannot gather sufficient appropriate evidence to
form an opinion
Report Modifications:
o Introductory paragraph: (We were engaged to
audit .; omit auditors responsibility)
o Omit scope paragraph
o Add paragraph preceding the opinion paragraph
describing the scope limitation
o Modify opinion paragraph (we do not express
an opinion.)
May still issue opinion on internal control if no scope
limitation on the examination of internal control

Lack of Independence
Scenario: Auditors begin engagement but
independence subsequently compromised
Report
o Single paragraph
o Indicates auditors are not independent
o Does not indicate why independence lacking

21

10/20/2015

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

22

General Approach for Other Matters

23

Issue unqualified opinion


but add paragraph to report
to discuss the matter
o Emphasis-of-matter
paragraphs provide
information related to
users understanding of
F/S
o Other-matter paragraphs
provide information related
to users understanding of
audit, auditors
responsibility, or auditors
report

Situations
o Consistency
o Going-concern
o Rule 203
departures from
GAAP
o Division of
responsibility
o Emphasis of a
matter

Consistency
Relates to:
o Change in accounting principles
o Adjustments to correct misstatements in
previously-issued F/S
Type of changes in accounting principles:
o Accounting principles (GAAP to GAAP)
o Form of reporting entity
o Accounting principles (non-GAAP to GAAP)
o Accounting principle inseparable from changes
in estimates
24

10/20/2015

Consistency: Effect on Report


Add explanatory paragraph following the opinion
paragraph
May issue a qualified opinion (GAAP departure) if:
o Change is not justified
o Change is not accounted for in conformity with
GAAP

25

Going-Concern Uncertainties
Auditors are responsible to evaluate whether
substantial doubt exists about ability of entity to
continue in existence for one year beyond date of
F/S
Options
o Add explanatory paragraph following opinion
paragraph (still unqualified opinion)
o If serious uncertainty, may issue disclaimer of
opinion
o Modified language must include the words
substantial doubt and going concern
26

Rule 203 Report


Rule 203 allows for unqualified opinions on F/S
that are not in conformity with GAAP if GAAP
would be misleading
Add explanatory paragraph either preceding or
following the opinion paragraph

27

10/20/2015

Division of Responsibility
Group financial statements: Financial
statements comprised of more than one
division/subsidiary/segment/component
Group auditors: Conduct audit of material portion
of the entity
Component auditors: May be engaged by group
auditors to audit divisions, subsidiaries, or
components

28

Division of Responsability
Take
Responsibility
for
Component
Auditors
Work?

YES

Standard Report
(Unqualified
Opinion)

YES

Obtain permission
and present
component
auditors report

NO
Refer to
Component
Auditors by
Name?
NO
Indicate Division
of Responsibility
in Unqualified
Opinion

29

Effect on Report

30

Group auditors should


o Verify component auditors reputation and
independence
o Communicate and coordinate with component
auditors
Options
o Take responsibility for work: Standard report
o Name component auditors
Present report of component auditors, only with
their permission
o Refer to component auditors
Modify introductory, scope, and opinion
paragraphs of report
Still express unqualified opinion, if appropriate

10

10/20/2015

Emphasis of a matter
Call user attention to important matters
Add explanatory paragraph after opinion
paragraph discussing the matter

31

Major Topics
I. Overview of Reporting
II. The Standard Report
III. Reasons for Departing from Standard Report

Departures from GAAP


Scope limitations
Other matters affecting the audit

IV. Other Issues and Reporting

32

Association with Unaudited F/S


Auditors permit use of name in communication
including F/S
Issue disclaimer of opinion (one paragraph)
o Do not mention auditing procedures performed
o Must identify any known departures from GAAP
in the report
o Should cover all unaudited prior-years financial
statements

33

11

10/20/2015

Comparative F/S
Continuing Auditors
o Update opinion by considering if previouslyissued opinions still appropriate
o If previously-issued opinions not appropriate,
revise opinion in current report
Predecessor auditors
o With permission, auditors may present reissued
report from predecessor on prior-years F/S
along with their report on current F/S
o If predecessors report not presented, auditors
report must reference predecessors report and
opinion on prior-years F/S
34

Information Accompanying F/S

35

Summary financial statements


o Expand report on full F/S to provide conclusion on
summary F/S (in relation to full F/S)
Other information (includes Presidents letter,
MD&A, and other information)
o Exception-based reporting
o Consider whether any inconsistencies affect
opinion on F/S
Required supplementary information
o Required to perform limited procedures
o Expand report on F/S to discuss procedures and
issues encountered with engagement or
information (if any)
o Disclaim an opinion on supplementary information

Reporting Summary
Opinion

Paragraphs modified/added

Material

Pervasive

Departure from GAAP

Qualified

Adverse

Scope Limitation

Qualified

Disclaimer

Other matters
(Consistency, Goingconcern, Rule 203,
Emphasis of a matter)

Unqualified

Unqualified

Other matters (Division


of responsibility when
referencing work of
component auditors)

Unqualified

Unqualified

Intro

Scope

Opinion

Addl

X
X

May issue disclaimer if:


Lack of independence
Associated with financial statements
Material and pervasive going-concern uncertainty
36

12

Potrebbero piacerti anche