Electronic Presentations in Microsoft ® PowerPoint ® Prepared by Brad MacDonald SIAST © 2009 McGraw-Hill Ryerson Limited.

Slides:



Advertisements
Similar presentations
LACPA ISA Presentation
Advertisements

Understanding Audit Reports
©2010 Prentice Hall Business Publishing, Auditing 13/e, Arens/Elder/Beasley Audit Reports Chapter 3.
Learning Objectives LO1 Prepare reports for review and compilation of unaudited financial statements, given specific facts. LO2 Write a report on a review.
Learning Objectives LO1 Understand the traditional approach to dealing with accounting uncertainty and going concern. LO2 Describe the main concepts of.
Learning Objectives LO1 Describe the current audit environment, including developments in regulatory oversight and provincial regulation of public accountants.
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter 21 CHAPTER 21 ASSURANCE, ATTESTATION, AND OTHER FORMS OF SERVICES.
Audit Reports Chapter 3.
©2005 Prentice Hall Business Publishing, Auditing and Assurance Services 10/e, Arens/Elder/Beasley Audit Reports Chapter 3.
GENERAL STANDARDS 1)The audit is to be performed by a person or persons have adequate technical training and proficiency as an auditor. 2)In all matters.
Chapter Two Audit Reports
BIT-224 Audit Chapter-2 Muhammad Khurshid Khan. Auditing Standards GAAS—Generally accepted auditing standards ensure “uniformly high quality audit work”
Auditors’ Reports. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved We have audited the accompanying balance sheet.
3 THE AUDIT REPORT WAS TIMELY, BUT AT WHAT COST?.
2-1 McGraw-Hill/Irwin ©2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 Professional Standards: “The Rules of the Road”
9.401 Auditing Chapter 2 Audit Reports. Association Must determine whether an accountant is associated with financial statements Must determine whether.
Filmmaker Krisztof Kieslowski
Auditing April 1, Chapter Two The CPA Profession just skim the section on Generally Accepted Auditing Standards Page
Auditing & Assurance Services, 6e
CHAPTER 2 FINANCIAL STATEMENT AUDITS AND AUDITORS’ RESPONSIBILITIES Fall 2007 u G enerally Accepted Auditing Standards u Assurance Provided by an Audit.
Professional Standards. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 2-2 Generally Accepted Auditing Standards-- General.
Audit Reports - Overview
Reports By David N. Ricchiute
Learning Objectives LO1 Describe the association framework. LO2 Determine whether a PA is associated with financial statements. LO3 Describe the three.
GENERAL TYPES OF AUDIT REPORTS
3 - 1 ©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder Audit Reports Chapter 3.
Electronic Presentations in Microsoft ® PowerPoint ® Prepared by Brad MacDonald SIAST © 2003 McGraw-Hill Ryerson Limited.
Reports on Audited Financial Statements
©2010 Prentice Hall Business Publishing, Auditing 13/e, Arens/Elder/Beasley Audit Reports Chapter 3 Instructor: Arshad Hasan.
 Audit Reports Chapter 3.   1. Report title  2. Audit report address  3. Introductory paragraph  4. Scope paragraph  5. Opinion paragraph  6.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley Audit Reports Chapter 3.
Akshat Hariya Article Assistant M. V. Damania & Co.
19-1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
1 Audit Reports AU-C Sections 700, 705, 706 & 708.
Auditor’s Professional Roles and Responsibilities
CHAPTER 14 Audit Reports.
2 - 1 Copyright  2003 Pearson Education Canada Inc. CHAPTER 2 The Auditor’s Reports.
Part Eleven Reporting on Financial Statements 1. 2 Structure of Seminar 1.Standards of Reporting 2.Types of Audit Opinions 3.Other Reporting Considerations.
17 -1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
©2010 Prentice Hall Business Publishing, Auditing 13/e, Arens/Elder/Beasley Audit Reports Chapter 3.
BA 427 – Assurance and Attestation Services
Chapter 17 Auditors’ Reports McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 3 Audit Reports 1.
Auditor’s Professional Roles and Responsibilities.
Audit Reports. PA’s Professional Responsibilities When associated with information, responsibilities include the following: Applicable standards in the.
2 - 1 ©2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley Audit Reports Chapter 2.
Copyright © 2016 South-Western/Cengage Learning AUDIT REPORTS ON FINANCIAL STATEMENTS CHAPTER 15 Auditing A Risk-Based Approach To Conducting A Quality.
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley Audit Reports Chapter 3.
Learning Objectives LO1 Describe the association framework. LO2 Determine whether a PA is associated with financial statements. LO3 Describe the three.
Auditors’ Reports Chapter 17. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved We have audited the accompanying balance.
Audit Reports Chapter 3. Audit Reports What is an audit report? Different reporting guidelines exist depending on the type of company upon which the auditor.
Electronic Presentations in Microsoft ® PowerPoint ® Prepared by Brad MacDonald SIAST © 2003 McGraw-Hill Ryerson Limited.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder.
Materiality And Audit Reporting Audit Report Audit Opinion
©2005 by the McGraw-Hill Companies, Inc. All rights reserved.
Chapter Two The CPA Profession
Reports on Audited Financial Statements
John T. Rigsby ACC 8033 BUSINESS ASSURANCE
Parts of standard unmodified opinion audit report
Audit Reports chapter 3 AU-C Sections 700, 705, 706 & 708
COMPLETING THE AUDIT AND REPORTING RESPONSIBILITIES
Chapter 3 Audit Reports.
Professional Standards
Audit Reports Chapter 3.
Chapter Two The CPA Profession
Audit Reports Chapter 3.
Audit Reports Chapter 3.
Presentation transcript:

Electronic Presentations in Microsoft ® PowerPoint ® Prepared by Brad MacDonald SIAST © 2009 McGraw-Hill Ryerson Limited

Learning Objectives Chapter Overview Chapter 3 Reports on Audited Financial Statements Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Slide 3 1.Describe the association framework. 2.Determine whether a PA is associated with financial statements. 3.Describe the three “levels of assurance” 4.Compare and contrast the scope and opinion paragraphs in a standard unqualified audit report. 5.For a given set of accounting facts and audit circumstances, analyze a qualified, adverse and denial audit report. 6.Write an unqualified audit report, containing additional explanation or modified wording for specific issues allowed by GAAS. Learning Objectives Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Slide 4 Learning Objectives 7.Determine the effects of materiality on audit report choices. 8.Apply and integrate the chapter topics to analyze a practical auditing situation / case / scenario. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Slide 5 9.Explain the differences in the American auditor’s report. (Appendix 3A) 10.Explain why auditors have standards for reporting on the application of accounting principles. (Appendix 3B) 11.Write an audit report in which the principal auditor refers to the work of another auditor. (Appendix 3C) 12.Write the required modifications to the audit report when prior- year comparative financial statements are changed. (Appendix 3C) Learning Objectives Online Appendices Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Slide 6 15.Describe the reporting requirements involved in auditors’ association with summarized financial information. (Appendix 3C) Learning Objectives Online Appendices 13.Identify the type of audit report issued when an audit engagement is limited. (Appendix 3C) 14.Explain auditors’ reporting responsibilities with respect to “other information” and supplementary (including pro forma) information. (Appendix 3C) Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Slide 7 The Association Framework Standard Unqualified Report and Variations. Audit Report Reservations. Unqualified Opinion with Explanation or Modification. Chapter Overview Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 8 The Association Framework Association is a term used within the profession to indicate a public accountant’s involvement with an enterprise or with information issued by that enterprise. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 9 The Association Framework Association can arise in three ways: –Through some action, the PA associates him or herself with information issued by the enterprise. –Without the PA’s knowledge or consent, the enterprise indicates that the PA was involved with information issued by them. –A third party assumes the PA is involved with information issued by an enterprise. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 10 PA’s Professional Responsibilities When associated with information, responsibilities include the following: –Applicable standards in the CICA Handbook must be met. –The PA complies with their provincial institute’s rules of professional conduct. –There is appropriate communication of the extent of their involvement with the information. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 11 Association with Financial Statements As a PA you are associated with financial statements when: –you consent to the use of your name in connection with the statements, or –you have prepared or performed some other services with respect to the statements, even if your name is not used in any written report. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 12 Association with Financial Statements The concept of association is far reaching. –Statements are produced on the PA’s letterhead. –Statements result from computerized bookkeeping services performed by the PA. –A document containing financial statements identifies an accountant as the public accountant or auditor for the company. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 13 Levels of Assurance Level of assurance Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 14 Levels of Assurance High assurance Audit Positive Assurance “In our opinion...” Middle assurance No assurance Compilation “No attempt to verify accuracy or completeness of information.” Review Negative Assurance “Nothing has come to our attention.” Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 15 Standard Unqualified Report The standard unqualified report contains four basic segments: –The introductory paragraph. –Management responsibility paragraph. –Auditor responsibility paragraphs. –The opinion paragraph. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 16 The Standard Report Introductory Paragraph Auditor’s report To the Shareholders of ……… We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20x1 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 17 Introductory Paragraph The first paragraph of the standard unqualified report: –Indicates that an audit was conducted. –Identifies the financial statements audited. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 18 Management’s Responsibility Paragraph Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 19 Auditor’s Responsibility Paragraphs Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 20 Auditor’s Responsibility Paragraphs (Continued) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 21 Auditor’s Responsibility Paragraphs These paragraphs are the auditor’s report of the nature of the work in the audit. –In accordance with GAAS refers to the general and examination standards. Auditors were trained and proficient. Auditors were independent. Due professional care was exercised. The work was planned and supervised Sufficient understanding of controls was obtained. Sufficient appropriate evidence was obtained. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 22 Audit Report Opinion Paragraph In our opinion, the financial statements present fairly, in all material respect the financial position of ABC Company as of December 31, 20x1, and of its financial performance and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. (Signed) Public Accountant City Date Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 23 Opinion Paragraph The final paragraph contains the auditors’ conclusions on the statements. –Financial statements are presented fairly in all material respects in accordance with GAAP. –Disclosure is adequate (implicit assertion). –Provide an expression of opinion. No reasons for giving the opinion need to be expressed. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 24 Reservation in the Audit Report Two reasons for qualifications in reports: –Financial statements contain a departure from GAAP including inadequate disclosure. –Scope limitation (extent of audit work has been limited) inability to obtain sufficient evidence. Qualified Opinion Adverse Opinion Materiality Denial of Opinion Qualified Opinion Materiality Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 25 GAAP Departure Reports Qualified report: –A departure from GAAP in the statements is material to users and can be isolated. –A reservation paragraph is added after the scope paragraph to describe the departure from GAAP. –“Except for” opinion with reference to reservation paragraph. –Introductory and scope paragraphs are unchanged. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 26 GAAP Departure Reports Adverse report: –Departures from GAAP in the statements are: “super-material” or “so significant that they overshadow the financial statements,” or pervasive, affecting numerous accounts and financial statement relationships. –Reservation paragraph added following scope paragraph. –Adverse opinion “…statements do not present fairly...” Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 27 Scope Limitation Reports A reservation paragraph is added following the scope paragraph to explain the limitations in scope of audit procedures. –Scope paragraph will be modified. –Qualified opinion “except for…” or –Denial of opinion “I am unable to express an opinion….”. –Departures from GAAP should be explained in the denial and comparative years should be covered. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 28 Effects of Lack of Independence An audit in accordance with GAAS is impossible if the auditor is not independent. –Auditor should resign or not accept the engagement. Code of Professional Conduct Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 29 Unqualified Opinion with Explanation or Modification Several circumstances may permit an unqualified opinion, but raise the need to consider additional information. –Consistency –Uncertainty –Emphasis paragraphs –Going Concern Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 30 Consistency Reference to consistency is not required for the following changes, provided disclosure of the change is adequate. –Changes in accounting policies. –Changes in accounting estimates. –Changes in classification of amounts. –Changes in format of the statements –Changes in subsidiaries included in consolidated statements. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 31 Uncertainty An example of accounting uncertainly is a contingency, which is a situation where a gain or loss cannot be determined until a future event occurs or does not occur. –There will be a lack of evidence about the future event. No qualification is required if the contingency is properly disclosed. –The auditor may add an emphasis paragraph to draw attention to the uncertainty. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 32 Emphasis of a Matter Paragraph Auditors may opt to add additional information to the auditor’s report. –Emphasis of matter (EOM) paragraphs refer to information presented in the financial statements. –Other matter (OM) paragraphs can refer to other information included with the financial statements, such as MD&A or comparative information from other periods. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 33 Going Concern GAAP assumes continued existence of the enterprise for at least one year. –Auditors must evaluate matters of financial analysis, business strategy, and financial forecasting. –Evidence of financial difficulties or mitigating factors should be observed. –Handle going-concern issues in the same manner as contingencies. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 34 Going-Concern Reports The CICA research study, “The Going-Concern Assumption” recommends five types of reports: –Standard: Going-concern issues are properly disclosed. –Standard with additional explanatory paragraph: Going-concern substantial issues are disclosed. –Adverse: There is a failure to disclose substantial doubts, and GAAP no longer applies. –Qualification: Disclosure of going-concern issues is inadequate. –Qualification: The auditor encounters a scope limitation with respect to going-concern issues. Tous droits réservés McGraw Hill Ryerson.

Learning Objectives Chapter Overview Learning objective Slide 35 Influence of Materiality Unqualified ** Uncertainty Denial of opinion QualifiedScope limitation AdverseQualified *Departure from GAAP Greater materiality Lesser materiality Circumstance Report type required Tous droits réservés McGraw Hill Ryerson.