9.401 Auditing
Chapter 2
Audit Reports
Association
 Must determine whether an accountant is
associated with financial statements
 As a PA you are associated with financial statements
when:
you have consented 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.

Association with Financial
Statements (FS)
CICA handbook Section 5020
 The concept of association is far reaching
 FS are on PA’s letterhead
 FS result from computer
bookkeeping services
 A document containing
FS identifies an
accountant as the PA

Association with Financial
Statements (FS)

If PA is associated with f/s, this creates an
obligation on his/her part:
 understanding of level of assurance
provided
 engagement letter
 perform work to standard expected
 communicate clearly level of assurance
provided
Auditor’s Report - Introductory
AUDITOR'S REPORT
Title
To the Shareholders of .................... Address of Client
I have audited the balance
Notice of Audit
sheet of .......... as at .........., 19.....
and the statements of income,
Identify FS
retained earnings and changes in
financial position for the year then
ended. These financial statements
Management
are the responsibility of the
Responsibility
company's management. My
Auditor Responsibility
responsibility is to express an
opinion on these financial statements
based on my audit.
Audit report - paragraph2
I conducted my audit in accordance
with generally accepted auditing standards.
Those standards require that I plan and
perform an audit to obtain reasonable
assurance 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.
Description
of the
audit
No special
mention of
consistency
Audit report - Opinion paragraph
Opinion on
financial statements
In my opinion, these financial statements present fairly,
in all material respects, the financial position of the
company as at .........., 19..... and the resultsRefer
of itsto GAAP
operations and the changes in its financial position for
the yearDate
then ended in accordance with generally
Signature
accepted accounting principles.
City
(signed) ................
Date
CHARTERED ACCOUNTANT
Reservation in the Standard
Unqualified 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
Audit Report Reservations

GAAP Departure Reports
reservation paragraph and “except for” opinion
 rare in published reports because legislation
requires statements in accordance with GAAP


Super Material GAAP Departure
more material or “so significant that they
overshadow the financial statements”
 pervasive, affecting numerous accounts and
financial statement relationships
 Adverse opinion “do not present fairly..”

Audit Report Reservations

Scope Limitation Reports
 eg. Management’s deliberate refusal to let
auditors perform some procedures
 eg. Circumstances, such as late appointment of
auditor, in which procedures cannot be
performed
 Qualified opinion “except for ”
 Denial of opinion “I am unable to express an
opinion….” if extremely material or
pervasive
 be wary of fraud implications!
Unqualified Opinion with
Explanation or Modification

Emphasis Paragraph


Auditors may opt to add additional information
to the report in a emphasis of a matter
paragraph
Unqualified opinion but with basis of
accounting other than GAAP
may use non GAAP if disclosure is improved
 alternative basis must be clearly explained

Unqualified Opinion with Explanation or Modification

Emphasis Paragraph
May include this for:
 information required by statute
 unaudited comparative figures
 comparative figures reported on by other auditors
 foreign reporting requirements
 going concern issues if following international
standards
 DO NOT Include this for:
 consistency if disclosed in accordance with GAAP
 going concern or contingencies if disclosed in
accordance with GAAP

Re-cap
Circumstances for
Departure from
standard report
Departure from GAAP
Lesser materiality
Greater materiality
Qualified “except for”
plus separate paragraph
Adverse opinion separate
paragraph for reasons
Limitation on scope
Qualified opinion refers
to possible effects on FS
Denial of opinion
Uncertainty
Unqualified Opinion
Unqualified opinion