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Analyze the various types of auditor’s reports, and determinethe impact that the auditor’s report has on a company’s ability toobtain financing from a bank. Identify the type of auditor’s reportissued on Verizon, and speculate the manner in which you believebanks will perceive Verizon’s auditor’s report.

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Tod Thiel
Tod ThielLv2
28 Sep 2019

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An entity has changed its depreciation method for productionequipment from a straight line method to units of production methodbased on hours of utilization. The entity’s auditor concurs withthe change although it has a material effect on the comparabilityof the entity’s financial statements. From the following opiniontypes, select and write the opinion type or types that can be usedby the auditor. Up to two opinion types can be selected. Inaddition, select and write the appropriate report modificationoptions that are required to be made by the auditor. You can selectas many options as apply. (Becker, Adopted) Opinion OptionsUnmodified Except for qualified Adverse Disclaimer ReportModification Options Issue the independent auditor’s report withoutmodification Modify the introductory paragraph Modify the auditor’sresponsibility paragraph Omit the auditor’s responsibilityparagraph Modify the opinion paragraph Add an emphasis-of-matterparagraph preceding the opinion paragraph Add an emphasis-of-matterparagraph following the opinion paragraph

i have one hour left

The following auditor’s report was drafted by a staff accountantof Nathan and Mat-
thew, CPAs, at the completion of the audit of the comparativefinancial statements

of Monterey Partnership for the years ended December 31, 2015and 2014. Mon-
terey is a privately held company that prepares its financialstatements on the income

tax basis of accounting. The report was submitted to theengagement partner, who

reviewed matters thoroughly and properly concluded that anunmodified opinion

should be expressed. The draft of the report prepared by aninexperienced staff audi-
tor is as follows:

Auditor’s Report

We have audited the accompanying financial statements ofMonterey Partnership,

which comprise the statements of assets, liabilities, andcapital–income tax basis as

of December 31, 2015, and the related statements of revenue andexpenses–income

tax basis and of changes in partners’ capital accounts–incometax basis for the year

then ended, and the related notes to the financialstatements.

Final PDF to printer

Auditor’s Responsibility

We conducted our audit in accordance with standards establishedby the AICPA.

Those standards require that we plan and perform the audit toobtain reasonable assur-
ance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidenceabout the

amounts and disclosures in the financial statements. Theprocedures selected depend

on the auditor’s judgment, including the assessment of the risksof material mis-
statement of the financial statements, whether due to fraud orerror. An audit also

includes evaluating the appropriateness of accounting policiesused as well as evalu-
ating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained issufficient and appropriate

to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to abovepresent fairly, in all

material respects, the assets, liabilities, and capital ofMonterey Partnership as of

December 31, 2015, and its revenue and expenses and changes inpartners’ capital

accounts for the year then ended in conformity with generallyaccepted accounting

principles applied on a consistent basis.

Basis of Accounting

We draw attention to Note 2 of the financial statements, whichdescribes the basis

of accounting. The financial statements are prepared on thebasis of accounting the

Partnership uses for income tax purposes. Accordingly, thesefinancial statements

are not designed for those who do not have access to thePartnership’s tax returns.

Our opinion is not modified with respect to this matter.

Nathan and Matthew, CPAs

April 3, 2016

Required:

Identify the errors and omissions in the auditor’s report asdrafted by the staff audi-
tor. Group the errors and omissions by paragraph, where applicable.Do not redraft

the report.

You are an audit accountant and you boss asks you the followingquestions

answer For financial audits, generally accepted governmentauditing standards (GAGAS) incorporate AICPA standards. GAGASprescribe additional requirements for reporting on Laws,Regulations, Reporting on Contracts, and Grants InternalControl

Yes No

No No

No Yes

Yes Yes

When reporting on an entity’s internal control over financialreporting in compliance with generally accepted government auditingstandards, an auditor should issue a written report that includesa

Statement of positive assurance that the results of testsindicate that internal control either can, or cannot, be relied onto reduce control risk to an acceptable level.

Statement of negative assurance that nothing came to theauditor’s attention that caused the auditor to believe significantdeficiencies were present.

Description of the scope of the auditor’s testing of internalcontrol.

Description of the material weaknesses and the strengths thatthe auditor can rely on in reducing the extent of substantivetesting.

Reporting standards for financial audits under GovernmentAuditing Standards differ from reporting standards undergenerally accepted auditing standards in that GovernmentAuditing Standards require the auditor to

Present the results of the auditor’s tests of economy andefficiency regarding the use of the entity’s resources.

Describe the scope of the auditor’s tests of compliance withlaws and regulations.

Provide negative assurance that the auditor discoveredno transactions that were indicative of illegalacts.

Provide positive assurance that the entity’s audit committee isadequately informed about the effects of any illegal acts.

An auditor determines that a client who received a federal grantfraudulently reported information to the federal government. Theclient’s management refuses to acknowledge the fraud. Which of thefollowing parties should the auditor contact first?

The recipients of the client’s services.

The state attorney general’s office.

The agency that provided the grant.

The state accountancy board.

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