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FSA Chapter 4

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  • 1. Financial Statement Analysis Chapter 4 Auditor´s report Bonsón, E., Cortijo, V., Flores, F.   Content on this file is licensed under a Creative Commons Attribution Non-Commercial No Derivatives Works 3.0
  • 2. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 3. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 4. Introduction
    • Financial statement audits provide a significant level of assurance about the reliability of financial statement information and its conformance to GAAP (Generally Accepted Accounting Principles)
    • The International Auditing and Assurance Standards Board (IAASB) is a standard-setting body designed by the International Federation of Accountants (IFAC). The main objectives of the IAASB are to set high quality auditing, assurance, quality control and related services standards
    • An increasing number of countries are already using or are in the process of adopting or incorporating International Standards on Auditing (ISAs), issued by the IAASB,
  • 5. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 6. The independent auditor’s report on a complete set of financial statements (ISA 700) Title The title must clearly indicate that it is the report of an independent auditor Addressee Shareholders of entity and/ or board of directors Introductory paragraph
    • Entity audited
    • Financial statements audited
    • Summary of significant accounting policies and other explanatory notes
    • Date and period covered by the financial statements
    Management’s responsibility for the financial statements Management is responsible for the preparation and the fair presentation of the financial statements according to the applicable financial reporting framework Auditor’s responsibility
    • The responsibility of the auditor is to express an opinion on the financial statements based on the audit
    • Description of an audit
    • Statement about the sufficiency and appropriateness of the evidence obtained by the auditor
    Auditor’s opinion Unqualified opinion: the auditor concludes that the financial statements give a true and fair view or are presented fairly, in all material respects, according to the applicable financial reporting framework Other reporting responsibilities Other reporting responsibilities must be addressed in a separate section Auditor’s signature Name of the audit firm, the personal name of the auditor or both Date of the auditor’s report The date of the auditor’s report cannot be earlier than the date on which the auditor has reached enough appropriate audit evidence on which to base his opinion Auditor’s address Location in the country or jurisdiction where the auditor practices
  • 7.  
  • 8. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 9. Modifications to the independent auditor’s report (IAS 701)
  • 10.
    • a qualified opinion should be expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion
    • An adverse opinion means that the financial statements do not present fairly, in all material aspects, the financial position, financial performance and cash flows of the company.
    • When the limitations on the scope are so material than the auditor cannot perform his work appropriately, he expresses a disclaimer of opinion . In this case, the auditor is unable to express an opinion
  • 11.  
  • 12. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 13. Effects of circumstances causing departures from the standard report
    • Limitation on scope
      • It may be imposed by the audited company; for example, the entity does not give the auditor appropriate information
      • It can also be circumstances not related to the audited company (if the auditor is engaged after December 31, he cannot observe the counting of physical inventories).
    • Disagreement with the Management
      • the acceptability of accounting policies selected
      • the method of their application
      • the adequacy of disclosures
  • 14. Index
    • Introduction
    • The independent auditor’s report on a complete set of financial statements (ISA 700)
    • Modifications to the independent auditor’s report (IAS 701)
    • Effects of circumstances causing departures from the standard report
    • Subsequent events
  • 15. Subsequent events The auditor must discuss the issue with management, and take the action appropriate in the circumstances. In case management does not amend the financial statements as recommended by the auditor, the auditor will express a qualified opinion or an adverse opinion. The auditor is not responsible, but, however, he must issue a new report including an emphasis of a matter paragraph referring to the note of financial statements that discusses in more detail the reason for the revision of both, the previously issued financial statements and the earlier auditor’s report.