WEEK 5 ISSUING AUDIT REPORTS SIMULATION 2Week 5 Issuing Audit Reports Simulation
What are the different types of audit reports and when should each be used?
In what types of situations would an auditor be allowed to issue an unqualified audit report?
To what extent is the auditor liable for misstatements in the financial statements of theaudited company?There are different types of auditing reports and each serve a particular purpose. Thestandard unqualified report is used when sufficient evidence has been provided to show thatthe reports are fairly presented and in accordance to GAAP. A non Standard unqualifiedreport is issued when there is an explanatory paragraph or some modified wording. This
usually occurs when the auditor’s engagement and examination of records has been
restricted, the financial statements are not prepared in accordance with GAAP and the auditoris not independent. Other reports that can be issued are an adverse, disclaimer or a qualifiedopinion.
A qualified opinion is an opinion that states that the audited entity’s financial
statements are in general accurate but an unresolved issue remains. An adverse opinion is
issued when the financial reports inaccurately reflect the audited company’s
financial/operation position. This can generally prevent a company from both selling stocksand borrowing monies. A disclaimer of opinion is better than an adverse one but still not apositive opinion. This type of opinion indicates that the auditor did not have sufficientinformation in order to formulate a proper or full opinion of the entities financial statements.Misstatements that are immaterial for both current and future periods can allow the issuanceof an unqualified report. Auditors are liable for misstatements that are material or omitted inthe financial statements of the audited company. Upon discovery, auditors are required to