Management Assertions

1
Management Assertions

• P resentation and Disclosure
• E xistence or occurrence
• R ights and obligations
• C ompleteness
• V aluation or allocation

2
Transaction-Related Audit Objectives
3
Balance-Related Audit Objectives
4
Types of Opinions

• Unqualified
• Qualified
• Adverse
• Disclaimer

5
Basic Report Structure

• Title
• Salutation
• Introductory paragraph
• Scope paragraph
• Opinion paragraph
• Signature
• Date

6
Unqualified Opinions

• Used when everything is okay
• Client has followed GAAP
• No scope limitations
• Disclosures are adequate
• Presentation has been consistent
• This is what the client wants

7
Qualified Opinions

• Does not mean Auditor is qualified.
• Most things are okay
• Departure from GAAP
• Material enough to mention
• Not material enough to be pervasive
• Scope limitation

8
Qualified Opinion Structure

• Intro paragraph unchanged
• Scope paragraph unchanged
• Third explanatory paragraph added before opinion
• Opinion modified except for

9
Adverse Opinion

• Statements do not conform with GAAP
• First two paragraphs unchanged
• Third paragraph is explanatory
• Opinion paragraph
• Because of
• do not present fairly
• Not allowed for scope limitation or independence
  problem

10
Disclaimer for Scope Limitation

• Issued for severe Scope limitation
• Different from that issued for Non-independence
• Standard first paragraph
• No scope paragraph
• Explanatory paragraph
• Because unable to form an opinion, therefore we
  dont

11
Disclaimer for Non-Independence

• Only one paragraph
• We are not independent
• Accordingly, we do not express an opinion

12
Unqualified yet Modified!

• Sometimes the financials conform to GAAP, yet
  they need special wording
• Examples
• Change in GAAP
• Going concern
• Emphasis of a matter

13
Modified Wording

• First three paragraphs of unqualified opinion
  remain the same
• Fourth paragraph is added to discuss issue
• Exception Use of another auditor
• All paragraphs are modified, none is added