ADMAS UNIVERSITY BISHOFTU CAMPUS

Course Title – Auditing Principles & Practice II

TITLE: GROUP ASSIGNMENT 3
GROUP MEMBERS
S.No NAME ID SECTION DIVISION DEPT.
1 Kalkidan mesfin 0086/17 2 3rd year Acc
2 Meron asresahegn 0337/17 2 3rd year Acc
3 Kalkidan mamushet 0123/17 2 3rd year Acc
4 Yared begna 0169/17 2 3rd year Acc

Submitted to Instructor: Samuel Belda

July 17, 2020 G.C.
Stay Safe!

Part I multiple choice Answer

1. E
2. A
3. D
 4. C
5. E
6. D
7. E

Part II Short answer

1. The three alternative opinions that may be appropriate that may be appropriate when the
clients financial statement are not in accordance with GAAP are an unmodified opinion
qualified as to opinion determine which is appropriate depends entirely upon materiality

A Qualified Opinion
Report is issued when the auditor encountered one of the two types of situations which do not
comply with generally accepted accounting principles, however, the rest of the financial
statements are fairly presented. A qualified report can take the form of a qualification of both the
scope and the Opinion or of the opinion alone. A scope and opinion qualification can be issued
only when the auditor has been unable to accumulate all of the evidence required by generally
accepted auditing standards. Therefore, this type of qualification is used the use of a
qualificationof the opinion alone is restricted to situations in which the financial statements are
not stated in accordance with GAAP.
A qualified opinion report can result from a limitation on the scope of the audit or failure to
follow generally accepted accounting principles
An Adverse Opinion
Is issued when the auditor determines that the financial statements of client are materially
misstated and, when considered as a whole, do not conform with GAAP.
It is used only when the auditor believes that the overall financial statements are so materially
misstated or misleading that they do not present fairly the financial position or results of
operations and cash flows in conformity with GAAP.
The adverse opinion report can arise only when the auditor has knowledge, after an Adequate
investigation, of the absence of conformity. This is uncommon and thus the adverse opinion is
rarely used.
Disclaimer of Opinion
Is issued when the auditor could not form, and consequently refuses to present an opinion on the
financial statements. This type of report is issued when the auditor tried to audit an entity but
could not complete the work due to various reasons and does not issue an opinion.
It is issued when the auditor is unable to be satisfied that the overall financial statements are
fairly presented.

2. Financial statement: - The audit of financial statements ordinarily covers the balance
sheet and the related statements of income, retained earnings, and cash flows.
The goal is to determine whether these statements have been prepared in conformity with
specified criteria
 Financial statement audits are normally performed by firms or certified public
accountants (CPA)
  Users of auditors' reports include management, investors, bankers (creditors) and
government agencies and etc

Compliance audit: - Is a review of an organization’s procedures to determine whether the

organization is following specific procedures, rules or regulations set out by some higher
authority.
 The purpose of compliance audit is; Dependent upon the existence of verifiable data and
of recognized criteria or standards, such as established laws and regulations, and or an
organization's policies and procedures.
 Like an independent financial statement audits, a compliance audit is designed to
determine whether an entity's financial statements are presented fairly in accordance with
generally accepted accounting principles or not.
 Compliance audits are conducted by either independent auditors or government auditors.

Operational audit: - An operational audit involves a systematic review of an organization's

activities, or a part of them, in relation to the efficient and effective use of resources. Sometimes
this type of audit is referred to as a performance audit or management audit:
 Effectiveness: - is a measure whether an organization achieves its goals and objectives.
 Efficiency: - shows how well an organization uses its resources to achieve its goals.

Similarities
 Financial statement audit, operational audit and compliance audit are similar in that each
types of audit involves accumulating and evaluating evidence about information to
ascertain and report on the degree of correspondent between the information and
established criteria

Difference
 The different between each types of audit are the information being examined ad the
criteria used to evaluate the information
Financial statement auditing focus of our external auditors .internal audit will complement the
work they perform based on an agreed plan. While financial audit takes into consideration
internal control as they pertain to the preparation and fair presentation to the financial statement
the auditor doesn’t provide an opinion on the effectiveness of internal controls

Operational audit focus on the review and assessment of the business process. Operational
audits are generally more difficult to conduct than financial and compliance audits. Since the
purpose of an operational audit is to assess effectiveness and efficiency, it can be very difficult to
identify objective, measurable criteria that can be used for that purpose.
Compliance audit review the level of compliance with internal policies or external regulatory
requirements. Compliance audit requirements can be either financial or non financial