REPORTING ON AUDITED FINANCIAL STATEMENTS

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REPORTING ON AUDITED FINANCIAL STATEMENTS
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PURPOSE OF AUDITORS REPORT

• INDICATE RESPONSIBILITIES
• MANAGEMENT RESPONSIBLE FOR FINANCIAL STATEMENTS
• AUDITOR RESPONSIBLE TO EXPRESS AN OPINION
• SCOPE
• AUDITOR FOLLOWED GAAS
• OPINION
• FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP

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STANDARDS OF REPORTING

• STATE WHETHER F/S ARE PER GAAP
• IDENTIFY CIRCUMSTANCES IN WHICH GAAP HAVE NOT
  BEEN CONSISTENTLY OBSERVED
• DISCLOSURE IN THE F/S ARE REGARDED AS REASONABLE
  UNLESS OTHERWISE STATED
• EXPRESS AN OPINION ON THE F/S AS A WHOLE

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THE FOURTH STANDARD OF REPORTING (AU 508.04)

• THE REPORT SHALL EITHER CONTAIN AN EXPRESSION OF
  OPINION REGARDING THE FINANCIAL STATEMENTS, TAKEN
  AS A WHOLE, OR AN ASSERTION TO THE EFFECT THAT AN
  OPINION CANNOT BE EXPRESSED. WHEN AN OVERALL
  OPINION CANNOT BE EXPRESSED, THE REASONS THEREFOR
  SHOULD BE STATED. IN ALL CASES WHERE AN AUDITOR'S
  NAME IS ASSOCIATED WITH FINANCIAL STATEMENTS, THE
  REPORT SHOULD CONTAIN A CLEAR-CUT INDICATION OF
  THE CHARACTER OF THE AUDITOR'S WORK, IF ANY, AND
  THE DEGREE OF RESPONSIBILITY THE AUDITOR IS
  TAKING.

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UNQUALIFIED AUDITORS REPORT

• TITLE
• MUST INCLUDE THE TERM INDEPENDENT
• ADDRESS
• STOCKHOLDERS, BOD, COMPANY
• INTRODUCTION
• REFER TO F/S, RESPONSIBILITIES OF MANAGEMENT AND
  AUDITOR

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• SCOPE
• GAAS, REASONABLE ASSURANCE, DEFINE AUDIT
• OPINION
• GAAP, FAIR PRESENTATION
• FIRM NAME
• DATE
• END OF FIELD WORK

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• CONDITIONS FOR UNQUALIFIED OPINION
• GAAS
• GENERAL, FIELDWORK, REPORT
• GAAP
• F/S PER GAAP
• ADEQUATE DISCLOSURE

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EXPLANATORY LANGUAGE ADDED TO STANDARD
UNQUALIFIED REPORT

• OTHER AUDITORS
• DEPARTURE FROM PROMULGATED GAAP
• GOING CONCERN
• LACK OF CONSISTENCY
• EMPHASIS OF A MATTER

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OTHER AUDITORS

• PRINCIPAL AUDITORS?
• MATERIAL PORTION
• KNOWLEDGE OF OVERALL FINANCIALS
• IMPORTANT PORTION
• RELY ON OTHER AUDITOR?
• REPUTATION
• INDEPENDENCE

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• ASSUME RESPONSIBILITY FOR OTHER AUDITOR?
• CORRESPONDENT FIRM, AGENT OF PRINCIPAL AUDITOR,
  OR IMMATERIAL PORTION OF F/S
• NO CHANGE IN AUDIT REPORT
• DONT ASSUME RESPONSIBILITY FOR OTHER AUDITOR?
• MODIFY INTRODUCTION (PERCENTAGE OF WORK DONE BY
  OTHER AUDITOR), SCOPE AND OPINION PARAGRAPHS

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DEPARTURE FROM PROMULGATED GAAP

• RULE 203 ET SECTION 203.01 OF THE CODE OF
  PROFESSIONAL CONDUCT OF THE AICPA STATES
• A MEMBER SHALL NOT (1) EXPRESS AN OPINION OR
  STATE AFFIRMATIVELY THAT THE FINANCIAL STATEMENTS
  OR OTHER FINANCIAL DATA OF ANY ENTITY ARE
  PRESENTED IN CONFORMITY WITH GENERALLY ACCEPTED
  ACCOUNTING PRINCIPLES OR (2) STATE THAT HE OR SHE
  IS NOT AWARE OF ANY MATERIAL MODIFICATIONS THAT
  SHOULD BE MADE TO SUCH STATEMENTS OR DATA IN
  ORDER FOR THEM TO BE IN CONFORMITY WITH GENERALLY
  ACCEPTED ACCOUNTING PRINCIPLES, IF SUCH
  STATEMENTS OR DATA CONTAIN ANY DEPARTURE FROM AN
  ACCOUNTING PRINCIPLE PROMULGATED BY BODIES
  DESIGNATED BY COUNCIL TO ESTABLISH SUCH
  PRINCIPLES THAT HAS A MATERIAL EFFECT ON THE
  STATEMENTS OR DATA TAKEN AS A WHOLE

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• ...IF, HOWEVER, THE STATEMENTS OR DATA CONTAIN
  SUCH A DEPARTURE AND THE MEMBER CAN DEMONSTRATE
  THAT DUE TO UNUSUAL CIRCUMSTANCES THE FINANCIAL
  STATEMENTS OR DATA WOULD OTHERWISE HAVE BEEN
  MISLEADING, THE MEMBER CAN COMPLY WITH THE RULE
  BY DESCRIBING THE DEPARTURE, ITS APPROXIMATE
  EFFECTS, IF PRACTICABLE, AND THE REASONS WHY
  COMPLIANCE WITH THE PRINCIPLE WOULD RESULT IN A
  MISLEADING STATEMENT.

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GOING CONCERN

• SUBSTANTIAL DOUBT EXISTS ABOUT THE ENTITYS
  ABILITY TO CONTINUE AS A GOING CONCERN ONE YEAR
  BEYOND THE DATE OF THE F/S
• OBTAIN INFORMATION ABOUT MANAGEMNTS PLANS AND
  ASSESS THE LIKELIHOOD OF SUCH PLANS BEING
  IMPLEMENTED
• IF SUBSTANTIAL DOUBT REMAINS
• ADD EXPLANATORY PARAGRAPH
• COULD DISCLAIM

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CONSISTENCY

• GAAP AND ACCOUNTING CHANGES
• CHANGE IN PRINCIPLE
• CUMULATIVE EFFECT
• RESTATE FOR SOME
• CHANGE FROM NON-GAAP TO GAAP IS CORRECTION OF AN
  ERROR (PRIOR-PERIOD ADJUSTMENT)
• CHANGE IN ESTIMATE
• PROSPECTIVE
• CHANGE IN ENTITY
• RESTATE

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• CHANGES AFFECTING COMPARABILITY PER GAAS
• CHANGE IN PRINCIPLE
• CHANGE IN ENTITY (DISCRETIONARY)
• CORRECTION OF ERROR IN PRINCIPLE (NON-GAAP TO
  GAAP)
• CHANGE IN PRINCIPLE THAT IS INSEPARABLE FROM A
  CHANGE IN ESTIMATE
• ADD PARAGRAPH AFTER OPINION

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EMPHASIS OF A MATTER

• AUDITOR CAN ADD PARAGRAPH BEFORE OR AFTER OPINION
  TO EMPHASIZE
• COMPONENTS OF A LARGER BUSINESS
• RELATED PARTY TRANSACTIONS
• SUBSEQUENT EVENTS
• ETC

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DEPARTURES FROM UNQUALIFIED OPINION

• GAAS
• AUDITOR HAS NOT PERFORMED SATISFACTORY AUDIT
• DOES NOT HAVE KNOWLEDGE IF F/S ARE FAIRLY STATED
  OR NOT
• QUALIFY OR DISCLAIM DEPENDING ON MATERIALITY

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• SCOPE (GAAS) LIMITATION
• AUDITOR IMPOSED (NOT INDEPENDENT)
• CLIENT IMPOSED
• CONDITION IMPOSED
• QUALIFIED REPORT
• QUALIFY SCOPE AND OPINION
• DISCLAIMER
• NO OPINION

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• GAAP - AUDITOR NOT SATISFIED AS TO FAIRNESS OF
  F/S
• AUDITOR HAS KNOWLEDGE THAT THE F/S ARE NOT FAIRLY
  STATED
• QUALIFY OR ADVERSE DEPENDING ON MATERIALITY

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• QUALIFIED OPINION DUE TO GAAP DEPARTURE
• QUALIFY OPINION PARAGRAPH
• ADVERSE OPINION
• THE F/S DO NOT PRESENT FAIRLY IN ACCORDANCE WITH
  GAAP

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OTHER REPORTING ISSUES

• PIECEMEAL OPINIONS (EXPRESSIONS OF OPINION AS TO
  CERTAIN IDENTIFIED ITEMS IN FINANCIAL STATEMENTS)
  
• SHOULD NOT BE EXPRESSED WHEN THE AUDITOR HAS
  DISCLAIMED AN OPINION OR HAS EXPRESSED AN ADVERSE
  OPINION ON THE FINANCIAL STATEMENTS TAKEN AS A
  WHOLE BECAUSE PIECEMEAL OPINIONS TEND TO
  OVERSHADOW OR CONTRADICT A DISCLAIMER OF OPINION
  OR AN ADVERSE OPINION.

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• COMPARATIVE STATEMENTS
• CHANGE PRIOR OPINION
• THE REPORT ON THE F/S OF THE PRIOR PERIOD SHOULD
  BE UPDATED IF AN AUDITOR BECOMES AWARE OF
  CIRCUMSTANCES OR EVENTS THAT EFFECT THOSE PRIOR
  PERIOD F/S
• CHANGE AUDITORS
• REFER TO PREDECESSOR AUDITOR OR
• ATTACH PREDECESSORS REPORT