Communicating Levels of Assurance Chapter 15 Communicating Levels of Assurance

Audits, Reviews, and Compilations of Historical Financial Statements Audit Reports Audit reports clearly delineate What was audited and responsibility for financial statements. Nature of the audit process. Auditor’s opinion of fairness of statements. Reasons for nonstandard report.

Audit Reports The fourth reporting standard requires an opinion or statement of why an opinion cannot be given. A public accounting firm is required to report on financial statements and must provide such a report when the firm is associated with the statements. A CPA firm is associated whenever it consents to the use of its name in a report.

Audit Reports Types of Audit Reports Standard unqualified report Unqualified with explanatory paragraph Qualified report Adverse report Disclaimer of opinion

Audit Reports Standard Unqualified Report No material violations of GAAP Disclosures are adequate All necessary procedures performed No change in GAAP with material impact Auditor is independent No going concern problems

Not affecting the opinion Audit Reports Modifications of the Standard Unqualified Report Not affecting the opinion Justified departure from GAAP Inconsistent application of GAAP Going concern doubt Emphasis of a matter Reference to other auditors

Modifications affecting the opinion Audit Reports Modifications affecting the opinion Unjustified departure from GAAP Qualified opinion Adverse opinion Inadequate disclosures Scope limitations Disclaimer of opinion

Modifications affecting the opinion Audit Reports Modifications affecting the opinion Disclaimer due to going concern doubt Auditor lacks independence Reports on Comparative Statements Disclaimer for unaudited statements of public company International Reporting

Reviews and Compilations Procedures common to all levels of service Reviews Review procedures Standard review report Limited assurance Compilations Procedures Standard compilation report Omission of Disclosures for compilations CPA lacks independence

Reports on Other Financial Information Special Reports Other comprehensive basis of accounting (OCBOA) Reporting on specific elements, accounts, or other items Compliance items related to audited financial statements Special-purpose financial presentations Financial information in prescribed forms

Reports on Other Financial Information Interim Financial Information Review procedures Reporting on interim statements presented separately Reporting on Interim Financial Information that accompanies audited annual financial statements Financial reports on the Internet

Reports on Non-Financial and Other Information Reports on Internal Control Reportable conditions Deficiencies in the design of the system Failures in the operation of the controls Absence of sufficient level of control consciousness within the organization Material weaknesses

Reports on Non-Financial and Other Information Reporting on a Client’s Internal Controls over Financial Reporting Reasonable criteria Planning the engagement Evaluating the design of internal controls Testing and evaluating operating effectiveness Forming an opinion Report requirements Evolving demand for reports on internal control

Reports on Non-Financial and Other Information Reporting on Evolving Assurance Services Electronic commerce Business performance measurement Health care performance measurement Risk assessment Information systems reliability Elder care assurance

The World of Assurance Services Attestation Standards Reports on Prospective and Pro Forma Financial Information Reports on Compliance with Laws and Regulations Reports on Agreed-Upon Procedures Engagements