Audit Report and Opinions

Flashcards covering key vocabulary and concepts related to audit reports, auditor opinions, and potential misstatements, based on lecture notes.

Purpose of an Audit

To enhance the level of confidence in the integrity of corporate reporting for the benefit of stakeholders.

Auditor's Opinion

An independent and objective opinion by the auditor on whether the financial statements are presented fairly, in all material respects.

Main Reporting Obligation (Companies Act 1993)

To the company's shareholders.

ISA (NZ) 700

Sets out minimum requirements for what should be included in the auditor’s report.

Typical Auditor's Report Content

Title, Addressee, Auditor's Opinion, Basis for Opinion, Going Concern (if applicable), Key Audit Matters, Other Information (if applicable), Responsibilities for the Financial Statements, Auditor’s Responsibilities, Other Reporting Responsibilities, Name of Engagement Partner, Signature, Auditor’s Address, Date.

Standard Unmodified Opinion

The auditor concludes the financial statements are free from material misstatement.

Qualified Opinion

Misstatements are material but not pervasive, or the auditor is unable to obtain sufficient evidence but believes the impact of undetected misstatements would be material but not pervasive.

Adverse Opinion

Misstatements are both material and pervasive to the financial report.

Disclaimer of Opinion

The auditor is unable to obtain sufficient evidence, and the potential impact of undetected misstatements could be both material and pervasive.

Nature of Matter Giving Rise to Modification

Whether the financial statements are materially misstated or there is an inability to obtain sufficient audit evidence.

Auditor's Judgement About Pervasiveness

The auditor’s judgement about the pervasiveness of the effects or possible effects of the matter on the financial statements.

Misstatement (ISA (NZ) 450.6)

A difference between the reported amount of a financial statement item and the amount required by the applicable financial reporting framework.

Sources of Misstatements (ISA (NZ) 450.A1)

Inaccuracy in data, omission of an amount or disclosure, incorrect accounting estimate, unreasonable judgements, inappropriate classification.

Auditor's Responsibility (ISA (NZ) 450)

Communicate all identified misstatements to management and request corrections.

Materiality

If omitted, misstated, or not disclosed separately, it has the potential to adversely affect decisions about the allocation of scarce resources.

Pervasive Effects (ISA (NZ) 705.5)

Not confined to specific elements, represent a substantial proportion, or are fundamental to users’ understanding.