Accounting & auditingLesson 3 of 4 in the course Auditing

Auditor's Reports: Opinions, Disclaimers, and Independence

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

An auditor’s report communicates an auditor’s opinion or, in some cases, explains why no opinion is expressed. It helps users understand whether financial statements are fairly presented, while leaving business and investment decisions to those users.

An auditor’s report is a formal opinion, or a disclaimer of an opinion, issued by an internal or independent external auditor after an audit. It is an assurance service: the report gives users information they can use when making decisions.

All flashcards

What is an auditor’s report?
A formal opinion, or disclaimer of an opinion, issued by an internal or external auditor after an audit.
How can an audit report benefit financial statement users?
It can increase the credibility of financial statements, supporting users’ reliance on them when they make decisions.
What is an unqualified opinion?
An opinion issued when the auditor has no significant reservation and concludes that the financial statements are fairly presented without material misstatement under the applicable framework.
What does reasonable assurance mean in an audit?
It is assurance that is high but not absolute; an audit does not guarantee that every error or problem will be found.
What are the three traditional paragraphs in an unqualified report body?
The introductory paragraph identifies the statements and responsibilities; the scope paragraph describes the audit; and the opinion paragraph states the auditor’s conclusion.

Quiz questions

  1. What is the primary purpose of an auditor’s report on financial statements?Answer: To communicate the auditor’s opinion so users can consider it when making decisions.
  2. What distinguishes a qualified opinion from an adverse opinion?Answer: A qualified opinion concerns a material but nonpervasive matter; an adverse opinion concerns pervasive misstatements.
  3. When may an auditor issue a disclaimer of opinion?Answer: When the auditor cannot obtain sufficient appropriate evidence to form an opinion.
  4. What is opinion shopping?Answer: Seeking or retaining an auditor based on the opinion the auditee expects to receive.
  5. How may government bodies use audit reports?Answer: To monitor public administrators and assess responsible management of public resources.

Based on the Wikipedia article Auditor's report, licensed CC BY-SA 4.0. Adapted into a summary, flashcards and quizzes.

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