A1 M6: Modified Opinions Due to Audit Issues

auditor needs to use to determine whether to issue a qualified opinion or disclaimer of opinion

professional judgement

qualified opinion due to an audit problem

expressed when the auditor is unable to obtain sifficient appropriate audit evidence on which to base an opinion and the auditor concludes that the possible effects of any detected misstatements could be material but not pervasive

disclaimer of opinion should be expressed

when the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion and the auditor concludes that the auditor concludes that the possible effects of any undetected misstatements could be both material and pervasive

scope limitation

when the auditor is unable to complete the audit fully

examples of conditions that restrict scope

• time constraints

• inability to obtain sufficient appropriate audit evidece

• refusal of management to provide written representation and/or to acknowledge its responsibility for the fair presentation of the financial statements in conformity with GAAP

• refusual of client's attorney to respond to inquiry

why may a scope limitation be caused

by circumstances beyond the control of the entity or circumstances relating to the nature or timing of the auditor’s work

what happens if the auditor becomes aware that management has imposed a limitation that may result in a qualified opinion or disclaim an opinion

the auditor should ask management to remove the limitation

what happens if management will not remove the limitation

the auditor should communicate with those charged with governance and determine whether it is possible to perform alternative procedures

association with financial statements

• consents to the use of his or her name in connection with the financial statements

• has prepared the financial statements, even if the accountant's name is not used

disclaimer on unaudited financial statements

• the accountant must read the financial statements for obvious errors

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

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

• if the client refuses to correct an obvious error, the auditor should add a paragraph modifying the disclaimer to describe, in a separate explanatory paragraph, the nature and effect of the departure from GAAP

qualified opinion due to audit issues: nonissuer

• title

• addressee

• qualified opinion

• basis for qualified opinion

• responsibilities of management for the financial statements

• auditor's responsibilites for the audit of the financial statements

• other reporting responsibilites

• signature of the auditor

• auditor's address

• date of the auditor's report

disclaimer of opinion due to audit issues: nonissuer

• title

• addressee

• disclaimer of opinion

• basis for disclaimer of opinion

• key audit matters

• responsibilities of management for the financial statements

• auditor's responsibilities for the audit of the financial statements

• other reporting responsibilities

• signature of the auditor

• auditor's address

• date of the auditor's report

qualified opinion due to audit issues: issuer

• opinion section

• additional paragraph

• basis for opinion section

• critical audit matters

disclaimer of opinion due to audit issues: issuer

• disclaimer of opinion section

• additional paragraph

• basis for disclaimer of opinion paragraph

• critical audit matters

unmodified

no material misstatement and sufficient evidence

qualified or adverse

material misstatement related to the uncertainty

qualified or disclaimer

insufficient evidence (scope limitation)