Chapter 4 – Reports on Audited Financial Statements
• Association – Indicates a public accountant’s involvement with an enterprise or with information
issued by that enterprise.
• Association can arise in three ways:
1. Through some action, the PAassociates himself with information issued by the enterprise.
2. Without the PA’s knowledge or consent, the enterprise indicates that the PAwas involved
with information issued by them.
3. Athird party assumes the PAis involved with information issued by an enterprise.
• When associated with information, a PA’s professional responsibilities include the following:
1. Applicable standards in the CICAHandbook must be met.
2. The PAcomplies with the appropriate rules of professional conduct.
3. There is appropriate communication of the extent of their involvement with the information.
Association with Financial Statements
• Associated with financial statements –Any involvement of a public accountant with financial
statements issued by a client.
• As a PA, you are associated with financial statements when:
1. You have consented to the use of your name in connection with them, or
2. You have prepared or performed some other services with respect to them, even if your
name is not used in any written report.
Levels of Assurance
• Auditors render 3 types of conclusions or “levels of assurance” about financial statements – The
amount of credibility provided by accountants and auditors.
1. Clean Opinion – The highest level of assurance with an opinion sentence that reads, “In our
opinion, the accompanying financial statements present fairly, in all material respects”.
Positive/reasonable/high assurance ideal forAudit engagements
2. Negative/ModerateAssurance – Opinion that reads, “Based on my review, nothing has
come to my attention that causes me to believe that these financial statements are not, in all
material respects, in accordance with Canadian GAAP”.
Auditing standards prohibit the use of negative assurance in reports on audited
financial statements because it is considered too weak a conclusion for the audit
effort involved. However it is permitted in reviews of unaudited financial
statements, letters to underwriters, and in reviews of interim financial information.
Ideal for Review engagements
3. NoAssurance – The PAprovides zero assurance credibility because there is no independent
verification of the data provided by the client. The lowest level of assurance.
Ideal for compilation engagements because no evidence is required.
Auditor’s Reports and Variations
1. The Standard Unmodified Report four segments:
• Introductory Paragraph – Declares that an audit has been conducted and identifies the
financial statements audited.
To the Shareholders of ………
We have audited the accompanying financial statements ofABC 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.
• Management Responsibility Paragraph – Gives notice of management’s (or other preparer’s) responsibility to prepare the financial statements in conformity with a fair
presentation reporting framework.
• Auditor Responsibility Paragraphs – (Scope paragraphs) Our responsibility