A1 M3 Forming an Audit Opinion

auditor forms an opinion on financial statements

presented fairly in all material respects in accordance with the applicable financial reporting framework

auditor takes into account to form an opinuon

1. whether sufficient appropriate audit evidence was obtained

2. whether uncorrected misstatements are material, individually or in the aggregate

3. whether the financial statements are prepared, in all material respects, in accordance with the requirements of the applicable financial reporting framework

financial statements contain

complete set of general-purpose financial statement including disclosures

when forming an opinion, auditor evaluates the applicable framework

• The financial statements adequately disclose the significant accounting policies selected and applied, including a description of the applicable financial reporting framework.

• The accounting policies selected and applied are consistent with the applicable financial reporting framework and are appropriate.

• The accounting estimates and related disclosures made by management are reasonable.

• The information presented in the financial statements is relevant, reliable, comparable, and understandable.

• The financial statements provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial statements.

• The terminology used in the financial statements, including the title of each financial statement, is appropriate.

• The overall structure and content of the financial statements is fairly presented.

• The financial statements, including disclosures, represent the underlying transactions and events in a manner that achieves fair presentation.

auditor refers to generally accepted auditing standards

guidelines on how to perform the audit

auditor refers to the financial reporting framework

evaluate whether the transactions are recorded and reported fairly in the financial statements

unmodified or unqualified opinion

states that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the entity in conformity with the applicable financial reporting framework

unmodified is the term for

a clean report for nonissuers

unqualified is the term for

a clean report for issuers

emphasis-of-matter and other-matter paragraphs are used for

nonissuers

explanatory paragraphs are used for

issuers

auditor’s report should be modified when

1. auditor concludes that the financial statements as a whole are materially misstated

2. auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements are free from material misstatement

qualified opinion

states that except for the effects of the matter(s) to which the qualification relates, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the entity in conformity with the applicable financial reporting framework

adverse opinion

states that the financial statements do not present fairly the financial position, results of operations, or cash flows of the entity in conformity with the applicable financial reporting framework

disclaimer of opinion

states that the auditor does not express an opinion on the financial statements

financial statements are materially misstated (financial statement issue) - none or immatieral

unmodified or unqualified

financial statements are materially misstated (financial statement issue) - material but not pervasive

qualified opinion

financial statements are materially misstated (financial statement issue) - material and pervasive

adverse opinion

inability to obtain sufficient appropriate audit evidence (audit issues) - none or immaterial

unmodified or unqualified opinion

inability to obtain sufficient appropriate audit evidence (audit issues) - material but not pervasive

qualified opinion

inability to obtain sufficient appropriate audit evidence (audit issues) - material and pervasive

disclaimer of opinion

criteria that define pervasive effects on the financial statements

1. they are not confined to specific elements, accounts, or items

2. if they are confined, they represent a substantial proportion of the financial statements

3. they are are disclosures fundamental to the users' understanding of the financial statements