Exam 19: Audit Reports on Financial Statements

The following are two unrelated situations. For each situation outline possible deviations (if any) from a standard auditor's report that may be necessary, and give reasons. State your assumptions. A) Rosebud Ltd. is a construction company that builds and repairs greenhouses for nurseries. An architect does the design and three different small construction companies are used to build the greenhouses. You are concerned that some of the projects that span the April year-end may result in material losses, even though income has been reported in the coming year. Management has refused permission for you to enter construction sites, as they feel that the construction sites will be dangerous and they do not want to be exposed to such liability. B) Save Our Trees is a charitable organization devoted to maintaining national woodland and green space. Fundraising is handled primarily by means of electronic mail and door-to-door canvassing by volunteers. Canvassing volunteers provide receipts at the door using prenumbered receipts. Donors who give money by email are sent receipts by email.

The new IAASB Auditors report, is effective for audits and will be mandatory for listed companies for audits with year ending

When a misstatement in the financial statements would affect a user's decision but the overall statements are still fairly stated, it would be appropriate to issue

An adverse opinion is issued when the auditor believes

PA firm has been auditing Big Manufacturing Company (BMC) for several years. Last year, BMC converted its inventory and purchasing systems to a new system effective December 31, the date of the year-end. To their horror, the PA firm discovered at the beginning of the current year that there was a cutoff error in the accounts payable system of $25 million dollars LAST YEAR. Neither the client nor the firm had detected that the purchases of December 31 had been omitted from the old computer system transaction processing and had been recorded only in the new computer system, understating last year's expenses. Last year's financial statements have been restated and the error disclosed in the notes to both last year's and this year's financial statements. What type of audit opinion will BMC receive this year?

The ASPE (Accounting Standards for Private Enterprises) financial reporting framework normally requires the auditor to report using the corresponding figures approach. This means that the auditor reports on

The dollar amount of some misstatements cannot be accurately measured. If, for example, the client was unwilling to disclose an existing lawsuit, the materiality question the auditor must evaluate in such a situation is