Claveria-Pa32 Govt Audt

Khimberly Grace S.
Claveria
PA – 32
1. What kinds of opinion do CPAs express regarding Financial Statements?
An auditor's opinion is a certification that accompanies financial statements. It is based

on an audit of the procedures and records used to produce the statements and delivers an
opinion as to whether material misstatements exist in the financial statements. An auditor's
opinion may also be called an accountant's opinion.
An auditor's opinion is presented in an auditor’s report. The audit report begins with an
introductory section outlining the responsibility of management and the responsibility of the
audit firm. The second section identifies the financial statements on which the auditor's opinion
is given. A third section outlines the auditor’s opinion on the financial statements. Although it is
not found in all audit reports, a fourth section may be presented as a further explanation
regarding a qualified opinion or an adverse opinion.
For audits of companies in the United States, the opinion may be an unqualified
opinion in accordance with generally accepted accounting principles (GAAP), a qualified
opinion, or an adverse opinion. An accountant who is independent of the company being
audited performs the audit.
 An auditor's opinion is made based on an audit of the procedures and records used to
produce financial records or statements.
 There are four different types of auditor's opinions.
 An auditor's opinion is presented in an auditor's report, which includes an introductory
section, a section that identifies financial statements in question, another section that
outlines the auditor’s opinion of those financial statements, and an optional fourth
section that may augment information or provide additional relevant information.
2. What does a CPA express?

Unqualified Opinion Audit
An unqualified opinion is also known as a clean opinion. The auditor reports an
unqualified opinion if the financial statements are presumed to be free from material
misstatements. In addition, an unqualified opinion is given over the internal controls of an entity
if management has claimed responsibility for its establishment and maintenance, and the
auditor has performed fieldwork to test its effectiveness.
Qualified Audit
A qualified opinion is given when a company’s financial records have not followed
GAAP in all financial transactions. Although the wording of a qualified opinion is very similar to
an unqualified opinion, the auditor provides an additional paragraph including deviations from
GAAP in the financial statements and points out why the auditor report is not unqualified.
A qualified opinion may be given due to either a limitation in the scope of the audit or
an accounting method that did not follow GAAP. However, the deviation from GAAP is not
pervasive and does not misstate the financial position of the company as a whole.
Disclaimer of Opinion
In the event that the auditor is unable to complete the audit report due to the absence
of financial records or insufficient cooperation from management, the auditor issues a
disclaimer of opinion. This is referred to as a scope limitation and is an indication that no
opinion over the financial statements was able to be determined. 1 A disclaimer of opinion is not
an opinion itself.
3. What are the “Auditing Standards” referred to in Audit Reports?

Generally accepted auditing standards (GAAS) are a set of systematic guidelines used
by auditors when conducting audits on companies' financial records. GAAS helps to ensure the
accuracy, consistency, and verifiability of auditors' actions and reports. The Auditing Standards
Board (ASB) of the American Institute of Certified Public Accountants (AICPA) created GAAS.
GAAS are the auditing standards that help measure the quality of audits. Auditors review and
report on the financial records of companies according to the generally accepted auditing
standards.
Auditors are tasked with determining whether the financial statements of public

companies follow generally accepted accounting principles (GAAP). GAAP is a set of
accounting standards that companies must follow when reporting their financial statements.
Auditors review a company's financial numbers and accounting practices to ensure they're
consistent and comply with GAAP. The Securities and Exchange Commission (SEC) requires
that external, independent auditors examine the financial statements of public companies.
 Generally accepted auditing standards (GAAS) are a set of principles that auditors
follow when reviewing a company's financial records.
 GAAS helps to ensure the accuracy, consistency, and verifiability of an auditors'
actions and reports.
 The generally accepted auditing standards (GAAS) are contained within three sections
that cover general standards, fieldwork, and reporting.
4. What are the significance of “INDEPENDENCE” in relation to audit work?
Public companies have a responsibility to ensure that the auditors of their financial
statements are independent, as do the auditors themselves. Regulation S-X sets forth the form
and content of and requirements for financial statements required to be filed with the
Commission, including the requirements for auditor independence. Ensuring auditor
independence is as important as ensuring that revenues and expenses are properly reported
and classified. If the auditor's independence is impaired then the company has not satisfied the
requirement to file financial statements audited by an independent accountant. Discovery of an
independence issue at the last minute can adversely affect an otherwise timely filing and call
into question the reliability of the company's financial reports.
Because auditor independence matters often involve unique and complex fact
patterns, OCA staff is able to provide the clearest guidance when companies or auditors
provide a written submission outlining the factual details of the auditor independence issues
under consideration. The staff believes this process is best accomplished through written
submissions on a named basis because of concerns that a clear understanding of the facts
may not be accomplished solely through oral and/or anonymous communications. However, in
some situations, particularly when asked to clarify certain independence rules, oral
communication is acceptable.
An audit is basically an examination of a set of records, both financial and non-
financial, to ensure that they can be relied upon in terms of accuracy and completeness. An
auditor is a qualified person who carries out the audit assignment and reports on the ‘true and
fair view’ of the client entity’s financial statements so that the users of financial statements can
rely on the reliability and credibility of the financial statements. There are many users of
financial statements who do not have sufficient knowledge to understand what is contained in a
company’s annual accounts. Thus, they rely on the auditor’s independent assessment and the
auditor’s main objective is to express an audit opinion over financial statements (Corplaw
Admin, 2014). This opinion intends to enhance credibility of the financial statement. The
opinion itself shall be credible and for that the auditor’s objectivity shall be beyond question.
This created requirements for auditor to be and appear to be independence of those influences
that could override his professional judgments.
Being independent is about preserving “Independent of mind” which is about the
capability to maintain profession objective while exercising professional judgment, which is
important to preserve quality of auditor’s judgment. While appearing independent is about
preserving “Independent of appearance” which is how public/users perceive auditor as being
objective which is important to get users confidence over auditor’s judgement.
Audit independence is important so that auditor’s opinion can be impartial, unbiased, free from
any undue influence or conflict of interest to override the professional judgement of the
professional accounting
5. What is the significance of the expression “present fairly” in auditors report?
The auditor's opinion that financial statements present fairly an entity's financial
position, results of operations, and cash flows in conformity with generally accepted accounting
principles should be based on his or her judgment as to whether ( a) the accounting principles
selected and applied have general acceptance; ( b) the accounting principles are appropriate in
the circumstances; (c) the financial statements, including the related notes, are informative of
matters that may affect their use, understanding, and interpretation (see paragraph 31 of
Auditing Standard No. 14, Evaluating Audit Results); (d) the information presented in the
financial statements is classified and summarized in a reasonable manner, that is, neither too
detailed nor too condensed (see paragraph 31 of Auditing Standard No. 14, Evaluating Audit
Results); and (e) the financial statements reflect the underlying transactions and events in a
manner that presents the financial position, results of operations, and cash flows stated within a
range of acceptable limits, that is, limits that are reasonable and practicable to attain in financial
statements.

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Khimberly Grace S.

1. What kinds of opinion do CPAs express regarding Financial Statements?

An auditor's opinion is a certification that accompanies financial statements. It is based

2. What does a CPA express?

3. What are the “Auditing Standards” referred to in Audit Reports?

Auditors are tasked with determining whether the financial statements of public

4. What are the significance of “INDEPENDENCE” in relation to audit work?

5. What is the significance of the expression “present fairly” in auditors report?

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