Friday, November 21, 2008

Auditor’s Report

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•Unmodified or ‘clean’ report -True and fair view in accordance with the financial reporting framework and whether it complies with statutory requirement.

•Modified report
-Matters that do not affect the auditors’ opinion –Emphasis of matters
-Matters that do effect the auditor’s opinion:
-qualified opinion (“except for”)
-disclaimer of opinion
-adverse opinion

Summary of qualifications

Auditor’s Opinion
•Limitation of scope > qualified/disclaimer
e.g.
-Unable to observe physical count
-Unable to carry out audit procedures
-Inadequate records

•Disagreement with management> qualified/adverse
e.g.
-Inappropriate accounting method
-Inadequate disclosure

Auditor’s Opinion
•“Except for” if not so material and pervasive
•“Disclaimer” when limitation of scope is so material and pervasive
•“Adverse” when disagreement with management is so material and pervasive

Samples of auditor’s opinion

-Limitation of scope –qualified opinion
“We did not observe the counting of inventories as of 31 December 2007, since that date was prior to the time we were initially engaged as auditors for the Company. Owing to the nature of the Company records, we were unable to satisfy ourselves as to inventory quantities by other audit procedures.In our opinion, except for the effects of such adjustments, if any,….the financial statements are properly drawn up…..(remaining same as ‘clean’ report)”


Samples of auditor’s opinion
-Limitation of scope –Disclaimer of opinion
“ We were not able to confirm accounts receivable due to limitations placed on the scope of our work by the company. Because of the significance of the matters discussed in the preceding paragraph, we do not express an opinion on the financial statements”

Samples of auditor’s opinion

-Disagreement on accounting policies(Inapproriate Accounting Method) -Qualified Opinion

“As discussed in Note X to the financial statements, no depreciation has been provided in the financial statements which practice, in our opinion, is not in accordance with accounting standards……..In our opinion, except for the effect on the financial statements of the matters referred to in the preceding paragraph, the financial statement the financial statements are properly drawn up…..(remaining same as ‘clean’ report)”


Samples of auditor’s opinion
•Disagreeement on Accounting Policies (Inadequate Disclosure) –Qualified opinion

“……….In our opinion, except for the omission of the information included in the preceding paragraph, the financial statements are properly drawn up…..(remaining same as ‘clean’ report)”

Samples of auditor’s opinion
•Disagreement on Accounting Policies (Inadequate disclosure) –Adverse Opinion

“ ……..In our opinion, because of the effects of the matters discussed in the preceding paragraph, the financial statements do not give a true and fair view of the financial position of the Company as of 31 December, 2007, and of the result of operations and its cash flows for the year then ended.

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