Audit Reports, Opinions, GAAP vs GAAS Issues, and Reporting Responsibilities

unmodified opinion

Financial statements present fairly in accordance with GAAP.

qualified opinion

Material but not pervasive issue; “except for” language.

adverse opinion

Financial statements are materially misstated and not in accordance with GAAP.

disclaimer

Auditor cannot obtain sufficient evidence; no opinion expressed.

GAAP issue

Problem with accounting principles or presentation.

GAAS issue

Problem with audit procedures or evidence.

emphasis‑of‑matter paragraph

Added to highlight important issues without modifying the opinion.

other‑matter paragraph

Added to highlight issues not presented in the financial statements.

comparative financial statements

Auditor must report on each period presented.

going concern

Substantial doubt about entity’s ability to continue operating for one year.

internal control over financial reporting

Auditor responsibility for issuers to opine on effectiveness of internal controls.

basis for opinion section

States GAAS compliance, independence, and sufficiency of evidence.

management responsibility section

Management prepares FS, maintains internal control, and evaluates going concern.

auditor responsibility section

Auditor provides reasonable assurance, assesses risks, understands controls, and evaluates estimates.

reasonable assurance

High but not absolute level of assurance.

material misstatement

Misstatement that could influence decisions of users.

pervasive

Misstatement affecting many elements of the financial statements.

scope limitation

Auditor cannot obtain sufficient appropriate evidence.

departure from GAAP

Financial statements are not presented in accordance with GAAP.