1. The Auditor’s Report

2. Types of Audit Reports n Unqualified Opinion Standard Report Modified Report n Qualified Opinion Scope Qualification GAAP Departure Qualification n Adverse Opinion n Disclaimer of Opinion Correspondence YES YES, but... NO DON’T KNOW

3. Types of Audit Reports n Unqualified Opinion Standard Report Modified Report –Added explanatory language without explanatory paragraph with explanatory paragraph

4. Added Explanatory Language n In accordance with accounting principles of foreign nations n Opinion based in part on report of another auditor n Departure from a promulgated accounting principle n Uncertainties (General) n Going Concern Uncertainties

5. Added Explanatory Language (Continued) n Inconsistent application of accounting principles n Comparative financial statements - updated reports n Information outside the basic financial statements n Emphasis of a matter

6. Updated Reports

7. Explanatory Language- Consistency As discussed in Note X to the financial statements, the Company changed its method of computing depreciation in 19X2.

8. Explanatory Paragraph - Uncertainty

9. Going Concern Uncertainty

10. Explanatory Paragraph - Rule 203 Departure

11. Accounting Issues Departure from GAAP Consistency UnqualifiedQualifiedAdverseDisclaimer Auditing Issues Lack of evidence By condition By client restriction Uncertainty General Going concern Lack of independence X X X X X Types of Audit Reports

12. GAAP Departures Qualified opinion Adverse opinion

13. GAAP Departures -- Qualified Opinion

14. Inadequate Disclosure - Qualified Opinion

15. GAAP Departures -- Adverse Opinion

16. Scope Limitations Qualified opinion Disclaimer of opinion

17. Scope Limitation -- Qualified Opinion

18. Scope Limitation -- Disclaimer of Opinion

19. Old Terms zShort-form audit report zPiecemeal opinions zCertificate and certified audit zSubject to qualification zClean opinion zClean audits

20. Communicating with Stockholders zOther information in an annual report zStockholders’ meetings

21. Communicating with Audit Committees zInternal control structure related matters zMaterial weaknesses zOther audit committee communications

22. Communicating with Management z Management letter z Conferences with management

23. Ethics Professional Ethics and the Auditing Environment

24. Elements of a Profession z Systematic Theory z Professional Authority z Community Sanction z Regulative Codes z Culture

25. Organizations, Standards, and Enforcement

26. Organizations zAICPA zFASB zGASB zState Boards of Accountancy zState Societies of CPAs

27. Code of Professional Conduct zSection I - Principles zSection II - Rules, Interpretations, and Rulings zRule Sections: yResponsibilities to the public (100 and 200) yResponsibilities to the client (300) yResponsibilities to colleagues (400) yOther responsibilities (500)

28. Responsibilities to the Public: Independence, Integrity, and Objectivity Example of Organization of the Rules of Conduct: Rule Section on Independence, Integrity and Objectivity

29. Responsibilities to the Public: General and Technical Standards

30. Responsibilities to Clients

31. Other Responsibilities

32. Quality Control zIndependence zAssigning personnel to engagements zConsultation zSupervision zHiring zProfessional development zAcceptance and continuance of clients zInspection

33. Monitoring and Enforcement z Peer review z Ethics enforcement z Public Oversight Board

34. External Regulation zSEC zLegal Liability

35. Organizations zAICPA zFASB zGASB zState Boards of Accountancy zState Societies of CPAs