AUD A1 - Audit Reports

Three levels of audit guidance

1. AICPA SAS (nonissuers) and PCAOB AS (issuers) (most authoritative)

2. Interpretive publications

3. Other auditing publications

Specific language is used top clarify the auditors level of responsibility

1. “Must” or “Is required” = Unconditional requirement

2. “Should” = Presumptively mandatory requirement (Must be able to justify departure and document

3. “May” “Might” “Could” = Not an imposed requirement, a recommendation

purpose of an audit

Provide financial statement users with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework

managements responsibilities

• Preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework

• Design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free of material misstatements

Auditor’s responsibilities

• Maintaining professional skepticism

• Comply with ethical requirements

• Exercising professional judgement

• Obtaining sufficient and appropriate evidence

• Complying with GAAS

Professional skepticism

Attitude that the auditor much apply when making professional judgements that provide the basis for the auditor’s actions. Having a questioning mind and is necessary to the critical assessment of audit evidence

Auditors should be alert for

• Evidence that contradicts each other

• Information that calls into questions the reliability of documents and responses to inquires that may be used as audit evidence

• Conditions that indicate possible fraud

• Circumstances that suggest the need for audit procedures in addition to those required by GAAS

Challenges auditors have when applying skepticism

• Unconscious human bias

• Inappropriate level of trust or confidence in management

• Pressure to avoid potential negative interactions

• Scheduling and workload demands

An auditor is unable to obtain absolute assurance due to

• Nature of financial reporting (i.e. subjective decisions)

• Nature of audit procedures(i.e. management may not provide complete info)

• Timeliness of financial reporting and the balance between cost and benefit

Nature and Scope of the Engagement

The following should be considered when determining the appropriate nature and scope of the engagement:

• Hired to perform audit for one period or multiple

• An audit may be on:

  • The complete financial statements

  • A single financial statement

  • Specific elements, accounts, or items of a financial statement

Objective of the Financial Statement Audit

• To obtain reasonable assurance on whether the financial statements as a whole are free from material misstatements, due to fraud or error, which enables the auditor to express an opinion on whether the financial statements are presented fairly

• To report on the financial statements and communicate as required by GAAS

Objective of Internal Control Audit

Express an opinion on the effectiveness of the company’s internal control over financial reporting

Objectives of the ERISA Plan Financial Statements Audit

• Form an opinion on the ERISA plan financial statements based on an evaluation of the audit evidence obtained

• Express clearly the opinion on the ERISA plan through a written report

• Accept an ERISA plan audit engagement when the basis upon which it is to be performed has been agreed upon through establishing whether the preconditions for the audit are present

• Appropriately plan and perform the audit of ERISA plan financial statements, including procedures required by this SAS on the certified investment information when management elects an ERIA section audit

• Perform procedures and report on the presentation of the supplementary info in accordance with this SAS

• Appropriately communicate to management and those charged with governance reportable findings that the auditor has identified during the audit

The selected financial reporting framework provides guidance on how to record transactions and events and:

• Evaluate if the financial statements adequately disclose significant accounting policies

• Evaluate if the financial statement policies selected are consistent with the reporting framework

• Evaluate whether accounting estimate made by management are reasonable

• Evaluate whether the financial statements, including disclosures achieve fair presentation

Unmodified (Unqualified) opinion

States that the financial statements are presented fairly, in all material aspects in accordance with the applicable financial reporting framework

Nonissuers: Unmodified

Issuers: Unqualified

To issue an unmodified (unqualified) opinion, the auditor should take into account:

• Whether sufficient evidence was obtained

• Whether uncorrected misstatements are material, individually or in the aggregate

• Whether the financial statements are prepared in accordance with the applicable financial reporting framework

Auditor’s report should be modified when:

• Auditor is unable to obtain sufficient appropriate audit evidence to conclude the financial statements

• Auditor concludes that the financial statements as a whole are materially misstated

• I.e. inaccurate numbers, missing disclosures

Types of modified opinions

• Qualified opinion

• Adverse opinion

• Disclaimer of opinion

Auditors issue a qualified opinion if they:

• Are unable to gather sufficient appropriate audit evidence

• Conclude that the possible effect of the matter is material, but not pervasive

Auditors issue a disclaimer of opinion (audit issue) if they:

• Conclude that the possible effect is material and pervasive

• Deny rendering an opinion as they:

  • are unable to gather sufficient appropriate audit evidence

Auditors issue an adverse opinion if they conclude that the financial statements:

• Have misstatements that are material and pervasive

• Do not present fairly

Pervasive

• Have far-reaching effects across several accounts

• If specific to only one account, it:

  • Represents a significant portion of the financial statements or

  • Has issues with disclosures that are fundamental to the users’ understanding

Sections of a standard unmodified opinion (OBRA)

• Opinion

• Basis for opinion

• Responsibilities of management for the financial statements

• Auditors responsibilities for the audit of the financial statements

Opinion

Includes the intro and sentence stating opinion, must be the first section in an auditors report

Basis for opinion (nonissuer)

Discusses the auditing standards followed and ethical responsibilities. Must be the second section in an auditors report

Responsibilities of management for the financial statements

States what management is responsible for like the preparation of the statements and using GAAP, also includes the framework required from management to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern

Where is the framework mentioned in an unmodified opinion

In the opinion and responsibilities of management

Where is GAAS mentioned in an unmodified opinion

In the basis for opinion and auditors responsibility

Auditor may use two sets of standards for auditing when:

• it is required, i.e. if it is a governmental entity, the auditors use both GAAS and governmental standards

• the auditor is engaged by the client to do so

The auditor should reference the two standards in the basis for opinion and auditors responsibilities

Key Audit Matters

• May be added to the nonissuer report (optional section)

• Can be added anywhere in the report after the second section

• Is added when the client engages the auditor to communicate KAM

• Used to give users more details about the nonissuer

Matters Communicated as KAMs

• Matters communicated with those charged with governance

• Areas with a higher assessed risk of material misstatements

• Areas requiring significant auditor and management judgement, including accounting estimates subject to a high degree of estimation uncertainty

• Significant events or transactions

KAMS should not include the matters giving rise to:

• a qualified opinion

  • Should be in the Basis of Opinion section

• Substantial doubt existing about an entity’s ability to continue as a going concern

  • Should be referenced somewhere else

Auditor may not communicate KAMs when an adverse or disclaimer opinion is given

Unqualified opinion (issuer)

In order to conclude that the financial statements are presented fairly in accordance with the applicable framework the auditor should evaluate the statements to ensure:

• They are informative of matters that may affect their use or ability to be understood

• that the accounting principles selected are applied and appropriate

• that the transactions and events are appropriately recognized, measured, and disclosed

Required sections for an unqualified opinion:(issuer)

• Opinion on the financial statements

• Basis for opinion

• Critical audit matters

Basis for opinion (issuer)

how we got comfortable with the opinion, what managements and the auditors responsibility is, that the firm is registered with the PCAOB and conducted with accordance, independent, and what procedures were performed

Where is the framework discussed for an issuers opinion

Opinion section vs the opinion and responsibility of management section for nonissuers

Where is auditing standard discussed for an issuers opinion

Basis for Opinion section vs the basis for opinion and responsibility of auditor section for nonissuers

Importance of the Critical Audit Matters Section

• The auditor’s report must include any CAMs arising from the current periods audit of financial statements

• Report working in Opinion section and basis for opinion section is often boiler plate and does not provide much visibility into the audit

• Provides more visibility into the more challenging areas of the audit

• Can appear anywhere after the 2nd section

• Average of about 2 CAM reported

To be considered a CAM, a matter must meet these 3 criteria:

1. Be a matter that was communicated or is required to be communicated to the audit committee

2. Relate to accounts or disclosures material to the financial statements

3. Involve challenging, subjective, or complex auditor judgement

Identification of CAMS (IPAS)

• Identify each CAM in the audit report

• Describe the principal considerations that led the auditor to determine a CAM

• Describe how the CAM was addressed in the audit

• Refer to the relevant financial statement accounts and disclosures

Form AP (Audit participants)

special form auditors are required to file with the PCAOB for each audit report issued

Includes:

• the name of the firm,

• name of the issuer,

• date of audit report

• end date of financial statements

• name of engagement partner

• participation of other audit firms

Filing form AP

• Must be filed by the 35th day after the audit report is filed with the SEC

• The other firms mentioned that participated do not have to file their own form

• Within 10 days if the audit report is included in a registration statement

Modified Opinion due to Financial Statement Issues (adverse)

• Not following selected framework (e.g. GAAP)

  • Exception: Client departs from GAAP and the auditor agrees. Unusual circumstances make justify a departure. In this case, the client may receive an unmodified or unqualified opinion

• Inappropriate accounting principles

  • Example: Client doesn’t want to consolidate financial statements, even though they control over 50% of another entity

• Unreasonable estimates

• Providing inadequate disclosures

• Incorrect numbers

• No reasonable justification for the changes in accounting principles

Qualified (Material) or Adverse (Material and Pervasive)

relates to financial statement issues

Qualified (Material) or Disclaimer (Material and Pervasive)

relates to audit issues

Modified opinion (nonissuer)

Changes will be made to the opinion and basis for opinion

Changes to opinion when given a modified opinion (nonissuer)

the heading will be labeled “Qualified Opinion” and will now state “except for the effects of the matter described in the Basis for Qualified Opinion section of our report” the rest stays the same

“Except for” = Qualified Opinion

Changes to basis for opinion when given a modified and adverse opinion (nonissuer)

the heading will be labeled “Basis for Qualified Opinion” and there is a new paragraph added describing the issue and quantify the effects

Changes to opinion when given an adverse opinion (nonissuer)

the heading will be labeled “Adverse Opinion” and will now state “because of the Basis for Adverse Opinion section of our report, the accompanying consolidated financial statements do not present fairly” the rest stays the same

Do not present fairly = Adverse opinion

qualified opinion (issuer)

• No heading changes for changes for qualified and adverse opinions for issuers

• Headings are consistent with the standard unqualified report

• Headings change for issuers only when disclaimer of opinion is rendered

Changes to opinion when given a qualified opinion (issuer)

“except for the effects of not capitalizing certain lease obligation as discussed in the following paragraph”

Except for = Qualified opinion

A paragraph is added describing the issue and effects of such

Rest of the report stays the same

Changes to opinion when given an adverse opinion (issuer)

The opinion will include “because of the effects of the matters discussed in the following paragraphs, the financial statements do not present fairly” and will have a second paragraph

CAM section is completely removed

Examples of conditions that restrict scope include (audit issues):

• Time constraints

• Inability to obtain sufficient appropriate audit evidence, such as:

  • Inability to observe inventory

  • Inability to confirm receivables

  • Inability to obtain audited financial statements of a consolidated investee

  • Restrictions on the use of auditing procedures

  • Inadequacy of accounting records

• Refusal of client’s attorney to respond to inquiry

Scenarios that always result in a disclaimer of opinion

• The auditor is not independent

  • Auditor should disclaim the opinion, can state why they aren’t independent, but have to state all the reasons or not at all

• Unaudited financial statements

• Refusal of management to provide written representation and/or acknowledgement of its responsibility for the fair presentation of the financial statements in conformity with GAAP (may also withdraw)

Disclaimer on unaudited financial statements

Requirements for this type of disclaimer on unaudited financial statements include:

• The accountant must read the financial statements for obvious errors

• “unaudited” should be clearly marked on each page of the financial statements

• The disclaimer may accompany the unaudited financial statements, or it may be placed directly on them

Emphasis of matter paragraph

• For a nonissuer, an emphasis of matter paragraph is included in the auditor’s report when required by GAAS or at the auditor’s discretion

• Used when referring to a matter that is appropriately presented or disclosed in the financial statements and is fundamental to the users understanding of the financial statements

When an emphasis of matter paragraph is included in the auditor’s report, the auditor should:

• Use the heading “Emphasis of matter” or other appropriate heading

  • Required to use the heading if engaged to communicate KAM

• Describe the matter being emphasized and the location of relevant disclosures about the matter in the financial statements

When is an emphasis-of-matter paragraph required:

CAP

• Consistency (Lack of)

  • To describe a justified change in accounting principle that has material effect on the entity’s financial statements

  • To describe a change in the reporting entity that results in financial statement that, in effect, are those of a different reporting entity

• Audit Opinion change

  • Subsequent discovered faced lead to a change in audit opinion

• Purpose - Special purpose frameworks

  • The financial statements are prepared in accordance with an appropriate special purpose framework

Use of an emphasis of matter paragraph is optional depending on:

• The extent to which the group engagement team is involved in the work of the component auditor

• The uncertainty related to the outcome of unusually important litigation or regulatory action

• A major catastrophe having a significant effect on the entity’s financial position

• Significant related party transactions

• Unusually important subsequent events

• Conditions raising substantial doubt about an entity’s ability to continue as a going concern exist but have been alleviated by management’s plans and adequately disclosed

Other-Matter Paragraphs (Nonissuers)

• Included in the auditors report when required by GAAS or at the auditor’s discretion and used when referring to matters other than those that are presented or disclosed in the financial statements that are relevant to:

  • User’s understanding of the audit

  • Auditor’s responsibility

  • Audit report

Report requirements:

• An “other-matter” or other appropriate heading is used

• Describes the matter

Other matter paragraph is required when

• Alert in audit report that restricts use

• Subsequently discovered facts lead to a change in audit opinion

• Prior period financials was audited by different firm and not reissued

• Financials shown in comparative form and prior period was not audited

Explanatory Paragraph (Issuers)

Included in the auditor’s report when:

• Required by the PCAOB auditing standards or

• At the auditor’s discretion

  • Inclusion does not impact the auditor’s opinion

• When an explanatory paragraph is included in the auditor’s report, the auditor should:

  • Use an appropriate heading

  • Describe the matter being emphasized and the location of relevant disclosure's about the matter in the financial statements

Location of the explanatory paragraph will generally follow the opinion paragraph when added to an unqualified report

When evaluating the acceptability of an accounting change, the auditor should consider whether:

1. The newly adopted accounting principle is in accordance with the applicable reporting framework

2. Method of accounting for the change is acceptable

3. Disclosures related to the accounting change are appropriate and adequate

4. Entity has justified it

If there is a change of audit opinion compared to PY, emphasis of matter or other-matter paragraph (nonissuer) or explanatory paragraph (issuer), you must disclose:

DORCS

• Date of the auditors previous report

• Opinion type previously issued

• Reason for the prior opinion

• Changes that occurs

• Statement that the “opinion is different”

If a different auditor did the PY audit and it is presented this means:

• The PY auditor's report is reissued

• The predecessors auditor should

  • Read the statements for the current period

  • Compare the audited statements with the current period statements

  • Obtain a letter of representation from the successor auditor starting whether the successor auditors audit revealed any matters that may have a material effects on the statements reported on by the predecessor auditor

  • Obtain a latter of representation from management stating whether any previous management representations have changed or whether any subsequent events have occurred that may require adjustment or disclosure in the reissued financial statements

In determining if previously presented financial statements are still appropriate as issued, the predecessor auditor should date the report as appropriate:

• Unrevised: Use original report date when reissuing previous report

• Revised: Dual date is used in the event that the predecessor auditor revises the report

If a different auditor did the PY audit and it is not presented this means:

• Not reissued

• The successor auditor should express an opinion on the current period financial statements only and indicate in an other-matter (nonissuer) or explanatory paragraph (issuer):

  • That the financial statements of the prior period were audited by a predecessor auditor

  • The type of opinion expressed by the predecessor auditor and the reason for any modification to the opinion

  • The nature of the any emphasis of matter, other matter, or explanatory paragraph included in the predecessors auditor’s report

  • The date of the predecessors report

Prior period financial statements reviewed or complied but not reissued

the auditor should include an other-matter paragraph (nonissuer) or explanatory paragraph (issuer) that includes:

• The service (review or compilation) performed in the prior period

• The date of the prior period report

• A description of any material modification described in the report

• A statement that the service was less in scope than an audit and does not provide the basis for expressing an opinion on the financial statements as a whole (review) OR’

• A statements that no opinion or other form of assurance is expressed (compilation)

Prior period financial statements not reviewed, complied or audited

• the auditor should include an other-matter paragraph (nonissuer) or explanatory paragraph (issuer) stating that the auditor did not audit, review, or compile the prior period financial statements and that the auditor assumes no responsibility for them.

• Whenever unaudited financial statements are presented in comparative form with audited financial statements, the unaudited financial statements should be clearly marked to indicate their status

• If unaudited financial statements are presented in comparative form with audited financial statements in documents filed with the SEC, such statements should be marked “unaudited” but should not be referred to in the auditor’s report.

Group Engagement Partner (AICPA) or Principal Auditor (PCAOB)

the partner or other person in the firm who is responsible for the group audit engagement and the auditors report on the group financial statements

Group Financial Statements

financial statements that include the financial information of more than one component (i.e. subsidiaries)

Group Engagement Team

includes the group engagement partner, other partners, and staff who establish the overall audit strategy, communicate with component auditors, perform work on the consolidation process, and evaluate the conclusions drawn from the audit evidence as the basis for forming an opinion on the group financial statements.

Component

an entity or business activity that prepares financial information that is included in the group financial statements

Component Auditor

an auditor who performs work on the financial information of a component that will be used as audit evidence for the group audit

The group engagement team must understand the following for each component auditor:

• Whether the component auditor is independent and will comply with all relevant ethical requirements

• The professional competence of the component auditor

• The reputation of the component auditor

The group engagement team will determine:

• The extent to which the group engagement team will be involved in the work of the component auditor

• Components that are significant or insignificant. Significant components will need to be audited and insignificant components will just need analytical procedures performed by the group engagement team

When the group engagement team relies on the work of the component auditor, the group engagement team has 2 alternatives:

• Option 1: Group engagement team takes full responsibility for the audit of the component- do not reference the component auditor

• Option 2: Group engagement team and component auditor divide responsibility - reference the component auditor. Typically, the component auditor is reference as “other auditor” in the report

Option 1: Assume responsibility of component team

No reference to the component auditor should be made in the auditor’s report. In this case, the group engagement team is responsible for:

• Determining the type of work to be performed on the financial information of the components

• Reviewing component auditor’s work

Option 2: Divide responsibility of component team

Group financial statements should reference the component auditor in the audit report

• Component auditor will provide their audit report to the group engagement team. Must be performed in accordance with relevant requirements of GAAS, or when required, PCAOB AS and the component auditor’s report should not be restricted.

• Group engagement partner will determine the appropriate opinion based on the group engagement audit and the audit report provided by the component auditor

• Even when responsibility is divided, the group engagement team still needs to be confident that the component auditor is independent, competent, and has a good reputation.

subsequent event

Event or transaction that occurs after the balance sheet date but before the financial statements are issued or available to be issued

recognized subsequent event

• Events that provide additional information about conditions that existed at the balance sheet date

• Management needs to adjust its financial statement amounts and/or adding disclosures

• Adjust and disclose the true value

• These events will often relate to estimate accounts since the data used in the financial statements may be based on preliminary data, i.e. a iitigation

• Recognized events will require adjustments and/or disclosure to the financial statements

• This ensures the financial statements provide the best representation of the financial statements for period presented

nonrecognized subsequent event

Events that provide information about conditions that occurred after the balance sheet date and did not exist at the balance sheet date

• Entities should not adjust the numbers on the financial statements

• They should consider disclosure to ensure the financial statements are not misleading

managements responsibility for subsequent events

Responsible for evaluating subsequent events through either:

• The date the financial statements are issued or widely distributed (issuers)

• The date the financial statements are available to be issued or in a form and format that complies with GAAP and all approvals for issuance have been obtained (nonissuers)

When an entity reissues or revises financial statements, the entity generally should not recognize events that occurred between the date the financial statements were issued or available to be issued

Auditor’s responsibility for subsequent events

Should understand management’s process to evaluate subsequent events and perform the following procedures (PRIME):

• Post balance sheet transactions - the auditors should review post balance sheet transactions

  • Commonly tested examples: changes in stock or long-tern debt after year-end

• Representation letter - the auditor should obtain a management representation letter regarding whether any events occurred during the subsequent period that require adjustment or disclosure in the financial statements

• Inquiry - auditor should inquire of the clients legal counsel and management about whether any subsequent events have occurred

  • Examples: status of any litigation, claims, and assessments, new commitments, borrowings, or guarantees

• Minutes - the auditor should obtain and review the minutes of stockholders, directors, and other committee meetings during the subsequent period

• Examine - the auditor should examine the most recent interim financial statements and compare them with the financial statements under audit

auditor will need to extend their subsequent procedures beyond the date of the audit report when:

auditors report is included in an exempt offering document and the auditor is involved in the offering

What happens when the auditor becomes aware of material information that they should have known about when they issued their report

• Investigate if this information is reliable, if it existed at the report date and would have affected the auditor report

• If determined that the auditor should have known about it when the report was issued, the auditor needs to take action

  • Need to determine if there are individuals relying on or likely to rely on, the financial statements and whether those persons would attach importance to the information

• Auditor should discuss the matter with management and, when appropriate, those charged with governance. The auditor should advise the client to immediately disclose the new info and its impact on the financial statements to those persons currently relying on the financial statements. This can be accomplished by:

  • Advising the client to issue revised financial statements (along with a new audit report) describing the reasons for the revision

  • Advising the client to make necessary disclosures and revisions to any imminent financial statements (accompanied by an auditors report for a subsequent period) or;

  • If effect cannot be determined on a timely basis, providing notification that the financial statements and auditors report should not be relied upon

• If adjustments and disclosures are made by the client after the original date of the auditor’s report, the auditor will need to perform additional procedures:

  • Dual date: extend auditor responsibility for the particular subsequent event only

  • Use later date: extend auditor responsibility for all subsequent events to report date

Client refusal to take appropriate action

Auditor should notify each member of the board of directors and perform the following additional steps: (DAR)

• Disassociate - notify the client that the auditor’s report must no longer be associated with the financial statements

• Alert agencies - notify any application regulatory agencies that the auditors report should no longer be relied on

• Relying parties - notify persons known to be relying or likely to rely on the financial statements that the auditor’s report should no longer be relied on

Other information includes information such as:

• A report by management or those charged with governance on operations

• Financial summaries or highlights

• Employment data

• Financial ratios

• Selected quarterly data

Doesn’t include:

• Press released or cover letters accompanying the document containing the audited financial statements and auditors report

• Information contained in analyst briefings

• Information contained on the entity’s website

Auditors responsibility for other information

• Read the other information

• Consider any material inconsistencies between the other information and the audited financial statements

• Respond accordingly by determining whether the audited financial statements or the other information needs to be revised

• Auditor should request management to correct the material inconsistency

Material inconsistencies: auditor action

• If the audited financial statements require revision and management refuses, the auditor should modify the opinion

• If the other information requires revision and management refuses, the auditor should communicate to those charged with governance and:

  • Consider the implication for the auditor’s report

  • Withhold the use of the report

  • Withdraw from the engagement and consul with legal counsel

Material misstatement of fact in other information: Auditor action

Other information may include a material misstatement of fact that is unrelated to the financial statement date

If the case, the auditor should:

• Discuss the mater with management

• If management refuses to take corrective action, request that management consult with a qualified third party such as legal counsel

• If after consultation with the third party, the auditor still believes there is a material misstatement of fact that management refuses to correct, notify those charged with governance.

Reporting on other information: issuer

• Auditors of issuers are not required to include an explanatory paragraph when other information is included in a document with the auditors report

• However, auditors may choose to include an explanatory paragraph within the auditor’s report disclaiming an opinion on the other information

Reporting on other information: nonissuer

• Can be in an emphasis of matter or other-matter paragraph

• Reported in a separate section

supplementary information

An auditor may be engaged to report (provide an opinion) on supplementary information in relation to the financial statements as a whole

• Supplementary information is information presented outside of the basic financial statements that may be presented in a document containing the audited financial statements or separate from the financial statements

• Auditor reports on the supplementary information that is derived from the audited financial statements

• Auditor is not providing an opinion on information unrelated to the financial statements, only on info that relates to the financial statements as a whole

auditors objective on reporting supplementary info

1. To evaluate the presentation of the supplementary information in relation to the financial statements as a whole

2. To report (provide an opinion) on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole

Audit procedures for supplementary info

The auditor should perform the following audit procedures using the same materiality level used in the financial statement audit:

• Inquire of management regarding the purpose of the supplementary information and the criteria used to prepare the information

• Obtain an understanding of the methods used and changes from prior periods

• Inquire regarding any significant assumptions underlying the preparation or presentation of the information

• Compare and reconcile the information to the audited financial statements and underlying accounting records

• Evaluate the appropriateness and completeness of the information

• Determine whether the form and content complies with the applicable criteria

Nonissuers: Supplemental information

For nonissuers, the auditor’s report on the supplementary information may either be presented in a:

• Separate section in the auditor’s report on the financial statements with the heading “Supplementary Information” OR

• Separate report

The report names the accompanying supplementary information, the procedures done, and the opinion

Nonissuers: Material misstatements in supplementary information

f management refuses to revise information that was concluded by the auditor to be materially misstated, the auditor should:

• Modify the opinion on the supplementary information (qualified or adverse) and describe the misstatement

• If a separate report is being issued on the supplementary information, withhold the report

Nonissuer: What if the audit report has an adverse, disclaimer or qualified opinion on supplementary info

adverse or disclaimer: prohibited from expressing an opinion

qualified: describe effects of the qualification and express qualified opinion

Issuers: Supplementary information

For issuers, unless prescribed by regulatory requirements, the auditor’s report on the supplementary information may either be presented in an:

• Explanatory paragraph in the auditor’s report on the financial statements OR

• Separate report