Class Notes (837,035)
Canada (510,049)
BUS 426 (14)
Lecture 10

Bus 426 - Lecture 10.docx

6 Pages
Unlock Document

Business Administration
BUS 426
Michael Favere- Marchesi

Lecture 10 (Final Lecture) Audit Reports Unqualified Opinion: Statement is free from material misstatement Qualified Opinion: Statement with a few sections having errors, rest is ok  “Except for…, the financial statements are fairly stated in accordance with GAAP” Adverse Opinion: Statement has material errors  “The financial statements are not fairly stated with GAAP”  Pervasive Matter: Tending to spread throughout o If Departure from GAAP = Adverse o If Scope Restriction = Disclaimer  We conducted the audit of… we were engaged to audit the financial statements. The auditor’s responsibility section reflect the fact that an audit could not be conducted, while explanatory which would give reasons as to why the audit could not be conducted Changes to Audit Opinion 1. Conditions that require a change from unqualified opinion 2. Types of opinions 3. Materiality Two Things to cause an opinion to cause an Unqualified to derail 1. Scope restriction 2. Departure from GAAP Scope Restriction When the auditor has no accumulated sufficient evidence to determine if financials are stated in accordance with GAAP  Maybe there was a restriction from the client (Client Imposed)  Maybe there was a restriction caused by circumstances beyond the control of the client and auditor (Circumstance Imposed) Departure from GAAP A departure from GAAP which could result in a material misstatement  Inappropriate accounting treatment (Ex: Failure to capitalize leases)  Inappropriate valuation (Ex: Failure to provide an adequate allowance for doubtful accounts)  Failure to disclose essential information in an informative manner (Ex: Failure to adequately disclose a material contingency) Role of Materiality Three types of materiality  Immaterial  Material  Pervasively Material  Usually if something is material, but not pervasive, it is limited to one or two accounts and can be only explained and described  If an issue is material and pervasive, it affects a major portion of the business, such as the ability to stay in operations  Materiality is considered in the context of a base (assets, income, …) and that the potential error needs to be measureable  It is more difficult to audit materiality of potential misstatement resulting from scope limitation  Those resulting from scope limitation must usually be subjectively measured in terms of potential or likely misstatements  For illegal acts, $ amount does not matter; It is illegal to steal even $1 Negative Assurance is not appropriate in a financial audit  Nothing came to our attention that would make us to believe that the financial statements are not fairly stated in accordance in GAAP  Would only give in a review  Most companies provide access to financial information through their web pages  Corporate  Investor Relations, information include the auditors’ report for the audited financial statements  Auditor is not required to read information contained on electronic sites Problems with the Statements  If the auditor becomes aware after audited financial statements have been issued that some information included in financial statement is materially misleading, the auditor has an obligation to make users who rely on financial statements aware of the misstatements  When it is pervasively material, and only when the information already existed at the report’s date, financial statements must be recalled or reissued Types of Work Financial Audit, Compilations and Reviews Review  Objective of review is to assess whether the information being reported is plausible within the framework of appropriate criteria (GAAP for F/S)  No substantive procedure  No or very limited test of controls 1. You obtain knowledge of the client 2. You make enquiries of the client’s staff 3. You preform ana
More Less

Related notes for BUS 426

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.