Opinion Flowchart

GAAP Departure Scope Limitation

(FS Issues) (GAAS Issue)

Material? Material?

Unmodified/
Yes No Unmodified/
Unqualified Yes No
Unqualified

Pervasive? Alternative
Procedures?

Yes No Qualified
Yes No

Adverse Unmodified/
Unqualified Pervasive?

Yes No

Disclaimer Qualified
 FS Audit Nonissuer
Financial Statement Audit
NONISSUER [PRIVATE] Comparative with Different Opinions
Qualified Qualified CY: PY: CY: PY:
Unmodified Due to GAAP departure Due to Scope Limitation Adverse Disclaimer Qualified Unmodified Unmodified Disclaimer
Title Independent Auditor's Report
Circumstances of engagement (General
Addressee rule not management)
DEAF
Date
Lead In Entity
Audited Was engaged to audit the financial
Financial Stmt Names statements
Management's Responsibility for the
Financial Statements
preparation and presentation
Management Responsibility DIM
Design
Implementation of internal controls
Maintenance
Auditor's Responsibility
S Standards
Express Opinion

In accordance with auditing standards

generally accepted in USA [framework]
Plan and perform audit to obtain
reasonable assurance free from material
misstatement, whether due to fraud or
error
O Our Audit
Perform procedures
Obtain audit evidence
Risk assessment
Considers Internal controls to
Design audit procedures

but not for the purpose of expressing an

Auditors Responsibility
opinion on the effectiveness of the entity's
internal control, and accordingly no such
opinion is expressed
Evaluate reasonableness of
Management estimates and
Overall presentation
B Basis

Because of the matters described in the

Basis for Disclaimer of Opinion
Evidence is sufficient and appropriate to Evidence is sufficient and appropriate to paragraph, however, we were not able to SAME AS
Evidence is sufficient and appropriate to provide basis for qualified audit opinion SAME AS QUALIFIED
provide basis for opinion provide basis for adverse audit opinion obtain sufficient appropriate audit UNMODIFIED
evidence to provide a basis for an audit
opinion

Basis for Qualified Opinion Basis for Adverse Opinion Basis for Disclaimer of Opinion Basis for Qualified Basis for Disclaimer of
Description and Quantification of Description and Quantification of
financial effects financial effects
- state if not practical to quantify - state if not practical to quantify
- can shorten paragraph by disclosing and - can shorten paragraph by disclosing and
Basis referencing disclosure Describe the reasons for the inability to referencing disclosure Describe the reasons for the inability to SAME AS
SAME AS QUALIFIED
Explanation of how disclosures are obtain sufficient and appropriate evidence Explanation of how disclosures are obtain sufficient and appropriate evidence DISCLAIMER
misstated misstated

Description of omitted information,

Description of omitted information,
included omitted information if practical
included omitted information if practical
Opinion Qualified Opinion Qualified Opinion Disclaimer of Opinion Qualified Opinion Disclaimer of Opinion

because of the significance of the

matter(s) described in the basis for
except for the effects of the matters(s) except for the possible effects of the because of the significance of the disclaimer opinion paragraph, the SAME AS
described in the basis for qualified matter(s) described in the basis for matter(s) described in the basis for auditor has not been able to obtain DISCLAIMER
Opinion
opinion paragraph; financial statements qualified opinion paragraph; financial adverse opinion paragraph; financial sufficient appropriate audit evidence to Opinion
financial statements present fairly in all present fairly in all material respects… in statements present fairly in all material statements do not present fairly in all provide a basis for an audit opinion;
material respects… in accordance with accordance with accounting principals respects… in accordance with accounting material respects… in accordance with and accordingly, the auditor does not
accounting principals generally accepted generally accepted in the USA principals generally accepted in the USA accounting principals generally accepted express an opinion on the financial SAME AS
in the USA [framework] [framework] [framework] in the USA [framework] statements SAME AS QUALIFIED UNMODIFIED
Emphasis-of-Matter
describe matter and relevant disclosure
location
auditors opinion is not modified with
respect to matter emphasized
required: GAASP
Going Concern
Accounting principal change (justified, material
effect)
Emphasis-of-Matter
Audit opinion change due to subsequent
discovered fact
Special Purpose Framework financial
statements
not required but may be needed:
litigation uncertainty
major catastrophe
significant related party transactions
important subsequent events
Other-Matter
required:
Restrict use of report
Audit opinion change due to subsequent discovered
fact
Prior FS audited by another auditor and report not
Other-Matter presented
Comparative FS, PY not audited
inconsistency (Material)
Report on supplemental info
Refer to required supplemental info
Report on compliance

Report on Other Legal and Regulatory

Other Reporting Responsibilities Responsibilities
Signature Firm Signature
Auditor's Address City and State
No earlier than date obtained sufficient
and appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have taken
responsibility for those FS

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB
GAASP

DORCS
Date of PY Report
Opinion of PR Report
Reason for PY Opinion
Changes that occurred
Statement that opinion different
 ICFR Nonissuer
Internal Control Audit
NONISSUER [PRIVATE]
Unmodified Adverse Disclaimer
Title Independent Auditor's Report
Circumstances of engagement (General
Addressee rule not management)
Report on Internal Control over
Financial Reporting

DEAF
Lead In
Date
Entity
Audited
Internal Control over Financial reporting Was engaged to examine
Management's Responsibility for the
Financial Statements
preparation and presentation
DIM
Management Responsibility Design
Implementation of internal controls
Maintenance
assessment of internal control [title of
management's report]
Auditor's Responsibility
S Standards
Express Opinion

In accordance with auditing standards

generally accepted in USA [framework]
Plan and perform audit to obtain
reasonable assurance about whether
effective internal control over financial
reporting was maintained in all material
respects.
O Our Audit
Perform procedures
Obtain audit evidence
Risk assessment
Auditors Responsibility obtain understanding of Internal controls
over financial reporting and testing and
evaluating the design and operating
effectiveness
B Basis

Because of the matters described in the

Basis for Disclaimer of Opinion
Evidence is sufficient and appropriate to Evidence is sufficient and appropriate to paragraph, however, we were not able to
provide basis for opinion provide basis for adverse audit opinion obtain sufficient appropriate audit
evidence to provide a basis for an audit
opinion

Definition and Inherent Limitation of

Internal Control Over Financial
Reporting Basis for Adverse Opinion Basis for Disclaimer of Opinion

charged with governance… provide

Definition reasonable assurance… in accordance + Define Material Weakness and
with [applicable framework] Describe the Material Weakness and Describe the reasons for the inability to
included in accompanying [title of obtain sufficient and appropriate evidence
Define Internal Control management's report ]
Inherent Limitations may not prevent, or
detect and correct misstatements
Opinion Disclaimer of Opinion

because of the significance of the

because of the effects of the material matter(s) described in the basis for
Opinion weakness described in the basis for disclaimer opinion paragraph, the
adverse opinion paragraph on the auditor has not been able to obtain
achievement of the objections of sufficient appropriate audit evidence to
In our opinion , [company ], in all material [identifying criteria] ; [company ] has not provide a basis for an audit opinion;
respects, effective internal control over maintained effective internal control over and accordingly, the auditor does not
financial reporting as of [date ] based on financial reporting as of [date ] based on express an opinion on the financial
[identify criteria ] [identifying criteria ] statements
Report on Financial Statements

Also audited, in accordance with auditing

Pointer standard generally accepted in the USA,
the [financial statements ] of [company ]
and our report dated [date ] expressed
[opinion ]
Signature Firm Signature
Auditor's Address City and State
No earlier than date obtained sufficient
and appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have
taken responsibility for those FS

Report on Audit of ICFR

Also audited, in accordance with auditing

standard generally accepted in the USA,
Add Paragraph to FS Report
[company ] internal control over financial
reporting as of [date ] based on [identify
criteria ] and our report dated [date ]
expressed [opinion ]

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB
GAASP
 Integrated Nonissuer
Integrated Audit
NONISSUER [PRIVATE] Comparative with Different Opinions
Qualified Qualified CY: PY: CY: PY:
Unmodified Due to GAAP departure Due to Scope Limitation Adverse Disclaimer Qualified Unmodified Unmodified Disclaimer
Title Independent Auditor's Report
Circumstances of engagement (General
Addressee rule not management)
Report on the Financial Statements
and Internal Control
DEAF
Date
Entity
Lead In
Audited Was engaged to audit the financial
Financial Stmt Names statements
Internal Control over Financial
reporting as of [date ] based on
[identifying criteria ]

Management's Responsibility for the

Financial Statements and Internal
Control over Financial Reporting
preparation and presentation
Management Responsibility DIM
Design
Implementation of internal controls
Maintenance
assessment of internal control [title of
management's report]
Auditor's Responsibility
S Standards
Express Opinion
In accordance with auditing standards
generally accepted in USA
[framework]

Plan and perform audit to obtain

reasonable assurance free from material
misstatement, and whether effective
internal control over financial reporting
was maintained in all material respects.
O Our Audit
Perform procedures
Obtain audit evidence
Risk assessment
Considers Internal controls to
Design audit procedures
Auditors Responsibility Evaluate reasonableness of
Management estimates and
Overall presentation
obtain understanding of Internal
controls over financial reporting and
testing and evaluating the design and
operating effectiveness
B Basis

Because of the matters described in

the Basis for Disclaimer of Opinion
Evidence is sufficient and appropriate to Evidence is sufficient and appropriate to provide basis for qualified audit opinion Evidence is sufficient and appropriate to paragraph, however, we were not able SAME AS
SAME AS QUALIFIED
provide basis for opinions provide basis for adverse audit opinion to obtain sufficient appropriate audit UNMODIFIED
evidence to provide a basis for an
audit opinion

Basis for Qualified Opinion Basis for Adverse Opinion Basis for Disclaimer of Opinion Basis for Qualified Basis for Disclaimer of
Description and Quantification of Description and Quantification of
financial effects financial effects
- state if not practical to quantify - state if not practical to quantify
- can shorten paragraph by disclosing
Describe the reasons for the inability to - can shorten paragraph by disclosing Describe the reasons for the inability to
Basis and referencing disclosure and referencing disclosure SAME AS
obtain sufficient and appropriate obtain sufficient and appropriate SAME AS QUALIFIED
Explanation of how disclosures are Explanation of how disclosures are DISCLAIMER
evidence evidence
misstated misstated

Description of omitted information,

Description of omitted information,
included omitted information if practical
included omitted information if practical
Definition and Inherent Limitation of
Internal Control Over Financial Basis for Qualified Opinion Basis for Qualified Basis for Disclaimer of
Reporting Basis for Adverse Opinion Basis for Disclaimer of Opinion Opinion Opinion
Description and Quantification of Description and Quantification of
charged with governance… provide financial effects financial effects
reasonable assurance… in accordance - state if not practical to quantify - state if not practical to quantify
Definition with [applicable framework] - can shorten paragraph by disclosing
Describe the reasons for the inability to - can shorten paragraph by disclosing Describe the reasons for the inability to
and referencing disclosure and referencing disclosure SAME AS
obtain sufficient and appropriate obtain sufficient and appropriate SAME AS QUALIFIED
Explanation of how disclosures are Explanation of how disclosures are DISCLAIMER
Define Internal Control evidence evidence
misstated misstated

Inherent Limitations may not prevent, or Description of omitted information,

Description of omitted information,
detect and correct misstatements included omitted information if practical
included omitted information if practical
Opinion Qualified Opinion Qualified Opinion Disclaimer of Opinion Qualified Opinion Disclaimer of Opinion

because of the significance of the

financial statements present fairly in all matter(s) described in the basis for
material respects… in accordance with except for the effects of the matters(s) except for the possible effects of the because of the significance of the disclaimer opinion paragraph, the SAME AS
Opinion accounting principals generally described in the basis for qualified matter(s) described in the basis for matter(s) described in the basis for auditor has not been able to obtain DISCLAIMER
accepted in the USA [framework]. Also opinion paragraph; financial qualified opinion paragraph; financial adverse opinion paragraph; financial sufficient appropriate audit evidence Opinion
In our opinion , [company], in all statements present fairly in all material statements present fairly in all material statements do not present fairly in all to provide a basis for an audit
material respects, effective internal respects… in accordance with respects… in accordance with material respects… in accordance with opinion; and accordingly, the auditor
control over financial reporting as of accounting principals generally accounting principals generally accounting principals generally does not express an opinion on the SAME AS
[date] based on [identify criteria] accepted in the USA [framework] accepted in the USA [framework] accepted in the USA [framework] financial statements SAME AS QUALIFIED UNMODIFIED
Emphasis-of-Matter
describe matter and relevant disclosure
location
auditors opinion is not modified with
respect to matter emphasized
required: GAASP
Going Concern
Accounting principal change (justified,
material effect)
Emphasis-of-Matter
Audit opinion change due to subsequent
discovered fact
Special Purpose Framework financial
statements
not required but may be needed:
litigation uncertainty
major catastrophe
significant related party transactions
important subsequent events
Other-Matter
required:
Restrict use of report
Audit opinion change due to subsequent
discovered fact
Prior FS audited by another auditor and report not
Other-Matter presented
Comparative FS, PY not audited
inconsistency (Material)
Report on supplemental info
Refer to required supplemental info
Report on compliance

Report on Other Legal and

Other Reporting Responsibilities Regulatory Responsibilities
Signature Firm Signature
Auditor's Address City and State
No earlier than date obtained sufficient
and appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have
taken responsibility for those FS

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB
GAASP

DORCS
Date of PY Report
Opinion of PR Report
Reason for PY Opinion
Changes that occurred
Statement that opinion different
 FS Audit Issuer
Financial Statement Audit
ISSUER [PUBLIC] Lack of Independence Comparative with Different Opinions
Qualified Qualified CY: PY: CY: PY:
Unqualified Due to GAAP departure Due to Scope Limitation Adverse Disclaimer Disclaimer Qualified Unqualified Unqualified Disclaimer

Title Report of Independent Registered

Public Accounting Firm
Addressee Shareholders and Board of Directors
Disclaimer of Opinion on the Financial Disclaimer of Opinion on the Financial Opinion on the Financial Opinion on the
Opinion on the Financial Statements Statements Statements Statements Financial Statements
DEAF
Date
Entity
Audited Was engaged to audit the financial Was engaged to audit the financial
Financial Stmt Names statements statements

because of the effects of the matters(s)

described in the following paragraph;
except for the effects of the matters(s) described in the following paragraph; financial statements do not present fairly as described in the following
financial statements present fairly in all financial statements present fairly in all material respects, the financial position of the in all material respects, the financial paragraph, because of [reasons] and we
material respects, the financial position of Company as of [date], and the results of its operations and its cashflows for the years position of the Company as of [date], and were not able to apply other auditing
the Company as of [date], and the results then ended, in conformity with accounting principals generally accepted in the USA the results of its operations and its procedures, we were not able to obtain
of its operations and its cashflows for the [framework] cashflows for the years then ended, in sufficient appropriate audit evidence to
Opinion provide a basis for an audit opinion;
years then ended, in conformity with conformity with accounting principals
accounting principals generally generally accepted in the USA and we do not express an opinion on SAME AS
accepted in the USA [framework] [framework] the financial statements UNQUALIFIED

All substantive reasons that lead to All substantive reasons that lead to
conclusion departed from GAAP conclusion departed from GAAP we are not independent with respect to
Disclosure of principal effects of Disclosure of principal effects of [company],…were not audited by us
qualification on qualification on and, accordingly, we do not express an
All substantive reasons for disclaimer
- financial position Describe the reasons for the inability to - financial position opinion on the financial statements
Disclosure of any reservations regarding
- results of operations obtain sufficient and appropriate evidence - results of operations
fair presentation in conformity with GAAP because of the effects of
- cash flows - cash flows Auditor not required to disclose reasons
the matters(s) described
but if chooses should include all reasons
in the following
- state if effects not reasonably determined - state if effects not reasonably determined for lack of independence
paragraph;
- can shorten paragraph by disclosing and - can shorten paragraph by disclosing and
referencing disclosure referencing disclosure
SAME AS QUALIFIED SAME AS QUALIFIED
Appropriate Title
Required:
Going Concern
Accounting principal change (justified,
material effect)
Change in reporting entity
Change in investee
Material misstatement from prior issued FS
corrected
Explanatory Paragraph Other information materially inconsistent
SEC req'd data omitted or not reviewed
Supp Information omitted
PY audit report not presented*
PY opinion updated*
Internal controls report not audited*
not required but may be needed:
litigation uncertainty
major catastrophe
significant related party transactions
important subsequent events
Basis for Opinion Basis for Disclaimer of Opinion Basis for Disclaimer of Opinion Basis for Opinion Basis for Opinion
Management's Responsibility financial
statements
Auditor's Responsibility:
S Standards
Express Opinion

Public accounting firm registered with

PCAOB and required to be independent
with respect to the company in accordance
with the US federal securities laws and the
applicable rules and regulations of the SEC
and PCAOB

Conducted in accordance with standards of Except as discussed above conducted in

PCAOB accordance with standards of PCAOB SAME AS QUALIFIED

PCAOB standards require plan and

perform audit to obtain reasonable
Basis assurance free from material misstatement,
whether due to fraud or error
O Our Audit
Perform procedures to
Assess risk of material misstatement
Procedures respond to risk
Examine evidence
Evaluate accounting principles and
significant estimates and
Overall presentation
The company not required to have nor
was auditor engaged to perform audit of
internal control
Required to understand IC but not for
purpose of opinion
Auditor expresses no such opinion
B Basis

We believe that our audit provide a

reasonable basis for opinion
Critical Audit Matters

communicated or required to be
communicated
1. material to FS accounts or disclosures
2. involves especially challenging,
subjective or complex audit judgement
Doesn't alter opinion, not separate opinion
Critical Audit Matters
For Each CAM = IPAR
Identify
Principal
Addressed
Relevant account/Discloser
No CAMS = We determined that there are
no critical audit matters
Firm Signature
Signature We have served as Company's auditor
since [year]
Auditor's Address City and State
No earlier than date obtained sufficient and
appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have taken
responsibility for those FS

ABC Auditors Opinion. Basis. CAM

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB

*no title for explanatory paragraph

needed

DORCS
Date of PY Report
Opinion of PR Report
Reason for PY Opinion
Changes that occurred
Statement that opinion different
 ICFR Issuer
Internal Control Audit
ISSUER [PUBLIC]
Unqualified Adverse Disclaimer

Title Report of Independent Registered

Public Accounting Firm
Addressee Shareholders and Board of Directors
Opinion on the Internal Control over Disclaimer of Opinion on the Financial
Financial Reporting Statements
DEAF
Date
Entity
Audited
Framework Was engaged to examine

because of the effects of the matters(s)

described in the following paragraph;
financial statements do not present fairly
in all material respects, the financial as described in the following
position of the Company as of [date], and paragraph, because of [reasons] we
the results of its operations and its were not able to perform sufficient
In our opinion , [company], in all material cashflows for the years then ended, in work to be able us to express and er do
Opinion respects, effective internal control over conformity with accounting principals not express, an opinion of the
financial reporting as of [date] based on generally accepted in the USA effectiveness of [company] internal
[identify criteria] [framework] control over financial reporting

All substantive reasons that lead to

conclusion departed from GAAP
Disclosure of principal effects of
qualification on All substantive reasons for disclaimer
- financial position Disclosure of any reservations regarding
- results of operations fair presentation in conformity with
- cash flows GAAP

- state if effects not reasonably determined

We have also audited in accordance with
- can shorten paragraph by disclosing and
PCAOB, [Financial Statements ], and our
referencing disclosure
report dated [date ] expressed [opinion ]
Basis for Opinion Basis for Disclaimer of Opinion
Management's Responsibility
maintain effective internal control over
financial reporting
assessment of internal control [title of
management's report]
Auditor's Responsibility:
S Standards
Express Opinion

Public accounting firm registered with

PCAOB and required to be independent
with respect to the company in
accordance with the US federal securities
laws and the applicable rules and
Basis regulations of the SEC and PCAOB
Conducted in accordance with standards
of PCAOB
PCAOB standards require plan and
perform audit to obtain reasonable
assurance free from material
misstatement, whether due to fraud or
error
O Our Audit
Obtain understanding
Assess risk of material weakness
Test based on assessment
B Basis

We believe that our audit provide a

reasonable basis for opinion

Definition and Inherent Limitation of

Internal Control Over Financial Basis for Qualified Opinion
Reporting

charged with governance… provide

Definition reasonable assurance… in accordance SAME AS QUALIFIED
with [applicable framework]

Define Internal Control

Inherent Limitations may not prevent, or
detect and correct misstatements
Firm Signature
Signature We have served as Company's auditor
since [year]
Auditor's Address City and State
No earlier than date obtained sufficient
and appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have
taken responsibility for those FS

NO TITLE
Also audited, in accordance with
standards of PCAOB , the effectiveness of
Add Paragraph to FS Report
internal control over financial reporting as
Following Opinion Paragraph
of [date ] based on [identify criteria ] and
our report dated [date ] expressed
[opinion ]

ABC Auditors Opinion. Basis. CAM

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB

*no title for explanatory paragraph

needed

DORCS
Date of PY Report
Opinion of PR Report
Reason for PY Opinion
Changes that occurred
Statement that opinion different
 Integrated Issuer
Integrated Audit
ISSUER [PUBLIC] Lack of Independence Comparative with Different Opinions
Qualified Qualified CY: PY: CY: PY:
Unqualified Due to GAAP departure Due to Scope Limitation Adverse Disclaimer Disclaimer Qualified Unqualified Unqualified Disclaimer

Title Report of Independent Registered

Public Accounting Firm
Addressee Shareholders and Board of Directors
and Internal Control over Financial Disclaimer of Opinion on the Disclaimer of Opinion on the Opinion on the Opinion on the
Reporting Financial Statements Financial Statements Financial Statements Financial Statements
DEAF
Date
Entity
Audited Was engaged to audit the financial Was engaged to audit the financial
Financial Stmt Names statements statements

because of the effects of the matters(s)

described in the following paragraph; as described in the following
financial statements present fairly in all except for the effects of the matters(s) described in the following paragraph; financial statements do not present paragraph, because of [reasons] and
material respects, the financial position financial statements present fairly in all material respects, the financial position of fairly in all material respects, the we were not able to apply other
of the Company as of [date], and the the Company as of [date], and the results of its operations and its cashflows for financial position of the Company as of auditing procedures, we were not able
results of its operations and its the years then ended, in conformity with accounting principals generally accepted [date], and the results of its operations to obtain sufficient appropriate audit
cashflows for the years then ended, in in the USA [framework] and its cashflows for the years then evidence to provide a basis for an
Opinion conformity with accounting principals ended, in conformity with accounting audit opinion; and we do not express
generally accepted in the USA principals generally accepted in the an opinion on the financial SAME AS
[framework] USA [framework] statements UNQUALIFIED

All substantive reasons that lead to All substantive reasons that lead to
conclusion departed from GAAP conclusion departed from GAAP we are not independent with respect to
[company],…were not audited by us
Disclosure of principal effects of Disclosure of principal effects of
and, accordingly, we do not express
qualification on qualification on All substantive reasons for disclaimer
Describe the reasons for the inability to an opinion on the financial
- financial position - financial position Disclosure of any reservations regarding
obtain sufficient and appropriate statements
- results of operations - results of operations fair presentation in conformity with
evidence because of the effects of
- cash flows - cash flows GAAP
Auditor not required to disclose reasons the matters(s) described
Also In our opinion , [company], in all - state if effects not reasonably - state if effects not reasonably but if chooses should include all in the following
material respects, effective internal determined determined reasons for lack of independence paragraph;
control over financial reporting as of - can shorten paragraph by disclosing - can shorten paragraph by disclosing
[date] based on [identify criteria] and referencing disclosure and referencing disclosure SAME AS QUALIFIED SAME AS QUALIFIED
Explanatory Paragraph Appropriate Title
Required:
Going Concern
Accounting principal change (justified,
material effect)
Change in reporting entity
Change in investee
Material misstatement from prior issued FS
corrected
Other information materially inconsistent
SEC req'd data omitted or not reviewed
Supp Information omitted
PY audit report not presented*
PY opinion updated*
Internal controls report not audited*
not required but may be needed:
litigation uncertainty
major catastrophe
significant related party transactions
important subsequent events
Basis for Opinion Basis for Disclaimer of Opinion Basis for Disclaimer of Opinion Basis for Opinion Basis for Opinion
Management's Responsibility
financial statements
maintain effective internal control over
financial reporting
assessment of internal control [title of
management's report]

Auditor's Responsibility:
S Standards
Express Opinion

Public accounting firm registered with

PCAOB and required to be independent
with respect to the company in
accordance with the US federal
securities laws and the applicable rules
and regulations of the SEC and PCAOB

Conducted in accordance with Except as discussed above conducted

standards of PCAOB in accordance with standards of PCAOB SAME AS QUALIFIED
Basis
PCAOB standards require plan and
perform audit to obtain reasonable
assurance free from material
misstatement, whether due to fraud or
error
O Our Audit
Perform procedures to
Assess risk of material misstatement
Procedures respond to risk
Examine evidence
Evaluate accounting principles and
significant estimates and
Overall presentation
obtain understanding of Internal
controls over financial reporting and
testing and evaluating the design and
operating effectiveness
B Basis

We believe that our audit provide a

reasonable basis for opinions

Definition and Inherent Limitation of

Internal Control Over Financial Basis for Disclaimer of Opinion Basis for Qualified Opinion Basis for Disclaimer of
Reporting Basis for Qualified Opinion Basis for Adverse Opinion Opinion
Description and Quantification of Description and Quantification of
charged with governance… provide financial effects financial effects Describe the reasons for the inability
reasonable assurance… in accordance - state if not practical to quantify Describe the reasons for the inability to - state if not practical to quantify to obtain sufficient and appropriate SAME AS QUALIFIED
Definition with [applicable framework] - can shorten paragraph by disclosing obtain sufficient and appropriate - can shorten paragraph by disclosing evidence SAME AS
and referencing disclosure evidence and referencing disclosure DISCLAIMER
Explanation of how disclosures are Explanation of how disclosures are
Define Internal Control misstated misstated

Inherent Limitations may not prevent, or

Description of omitted information, Description of omitted information,
detect and correct misstatements
included omitted information if practical included omitted information if practical
Critical Audit Matters
communicated or required to be
communicated
1. material to FS accounts or disclosures
2. involves especially challenging,
subjective or complex audit judgement
Doesn't alter opinion, not separate
Critical Audit Matters opinion
For Each CAM = IPAR
Identify
Principal
Addressed
Relevant account/Discloser
No CAMS = We determined that there
are no critical audit matters
Firm Signature
Signature We have served as Company's auditor
since [year]
Auditor's Address City and State
No earlier than date obtained sufficient
and appropriate evidence
- documentation reviewed
Date of Audit Report
- all stmts and notes prepared
- management has asserted they have
taken responsibility for those FS

ABC Auditors Opinion. Basis. CAM

Report Header
Same as standard
unmodified/unqualified
Omitted
LMAO
DEAF
DIM
SOB

*no title for explanatory

paragraph needed

DORCS
Date of PY Report
Opinion of PR Report
Reason for PY Opinion
Changes that occurred
Statement that opinion different
 Comparative FS

PY Audit Report No PY Audit

Responsibility Present Do not present Lower Service No Service
Read CY stmts **Other Matters/ Explanatory **Other Matters/
Compare PY to CY Service in PY Explanatory
Letter of rep from new auditor Date (PY) Auditor assumes no
Old CPA Letter of rep from management Material Modification in PY responsibility for PY
**Other Matters/ Explanatory report
Less in scope than audit
PY audited by old CPA
Opinion
Nature of EOM/Exp PY report
New CPA Date of PY report

Component Auditor Single Statement/ Element Reporting

In Conjecture with complete Not with Complete set of
Responsibility: Assume Responsibility Divide Responsibility set FS
Issue separate report
Indicate specific element
Paragraph Component = Unmodified Component = Unmodified Nature of Opinion
Opinion Type Unmodified Unmodified
Into
Auditor
Responsibility Modify
Opinion Modify
Basis
Component = Qualified (not material Component = Qualified (not
Opinion Type to overall FS) material to overall FS)
Into Unmodified Unmodified
Auditor
Responsibility
Opinion Modify
Basis Modify
 Subsequent Events
Examine the latest Subsequent Events
interim financial
statements Fiscal YR Ending Date

Type 1 Subsequent Type 2 Subsequent

Event Event

• Nov. Y1 Dec. Y1 Feb. Y2 Mar. Yr 2 Apr. Yr 2

PRIME **
See options*

Auditor' s Report Date Issue Date

Type 1 Subsequent Event= Exists as of Balance Sheet Date (Recognized)

Type 2 Subsequent Event= Did not exists as of Balance Sheet Date (Not Recognized = Footnote)
Auditor's Report Date = Obtained Sufficient and Appropriate Audit Evidence

Auditor's Responsibility for Subsequent Events up till:

Issuer = Issue Date
NonIssuer = Available to Issue

PRIME TEST Inquiry

Post Balance Sheet Transactions New commitments, borrowing, guarantees
Sales or acquisitions of assets
Rep letter from management Increase in capital or debt
Inquiry Assets destroyed or appropriated
Minutes Contingency developments
Unusual accounting adjustments
Examine latest interim FS

*Options
Dual Date
Change completion date but need to extend audit work
Mark disclosure as unaudited and keep current report date

** After Issuance
If material affects report and reliance on report
- Advise client to disclose and reissue FS
- If client refuses= auditor notify BOD of refusal and additional actions auditor may take
notify audit report may no longer be relied on
notify regulatory agencies
notify known persons relying on FS
 Subsequent Events
The following subsequent event audit procedures should be performed:
• Review of post balance transactions

• Review management representation letter

Make inquiries of management regarding any unusual adjustments that may
•
have been made in the month of January and February Year 2
Review of the minutes of a stockholders meeting that took place on Jan 10,
•
Year 2
• Examine the latest interim financial statements
 OCBOA
Cash Tax Regulatory Regulatory Basis Contractua
Paragraph Basis Basis Basis (General Use) l Basis Other Basis
Opinion Single Single Single Dual Single Single
Description of purpose No No Yes Yes Yes Yes, if restricted
EOM Yes Yes Yes No Yes Yes
OM No No Yes No Yes Yes, if suitable only for specific users

FS Titles: NON GAAP

Auditor's Responsibility
1. Purpose
2. Users
3. Mngmt determines acceptable
4. Understand contract

DIFFERENCE FROM STANDARD REPORT

Title
Addressee
Lead In identifies special purpose
Management Responsibility reference managements responsibility for determining
applicable framework is acceptable for circumstances
purpose of financial statements
Auditors Responsibility
Basis reference to applicable law or framework
in accordance with those standards
Opinion reference special purpose framework
Emphasis-of-Matter indicate prepared in accordance with special purpose
Other-Matter restrict use
Other Reporting Responsibilities
Signature
Auditor's Address
Date of Audit Report
 Assertions & Materiality & Risk
Account Transactions Presentation
Assertion AUDITING PROCEDURE
Balances & Events & Disclosure
Tracing Analytical Review
Completeness Yes Yes Yes
Observation
Cutoff Yes Cutoff
Valuation, Allocation &
Accuracy
Valuation Yes Yes Inspection of documents
Allocation Yes Footing Reconciliation
Accuracy Yes Yes Recalculation
Existence & Occurrence
Existence Yes Confirmation Vouching
Occurrence Yes Walkthrough
Rights & Obligations
Rights Yes Yes
Inspection of documents
Obligations Yes Yes
Understandability &
Classification
Understandability Yes Inspection of documents Inquiry
Classification Yes Yes Review of disclosures

Materiality = FS overall + each: % of assets

Account Balances % of gross revenue
Transactions & Events % of income
Presentation & Disclosure
Issuers: Tolerable misstatement
Qualitative & Quantitative Non Issuers: Performance materiality
Preliminary assessment of materiality factors:
percentage of FS benchmark usually a % of FS misstatement
where users focus attention
nature of entity and industry Assets $ 2,000,000.00 1.50% = $ 30,000.00
prior period financial results Gross Revenue $ 4,200,000.00 1.00% = $ 42,000.00 Overall FS materiality
known expected changes (annualize) 70.00% = $ 29,400.00 Performance materiality
 Assertions & Materiality & Risk
Material Misstatement TYPES OF MATERIAL MISSTATMENT
Inaccuracies
Factual
Departures NO DOUBT!!
Omissions
Incorrect estimates Projected Judgmental
Auditor best guess of misstatement in Difference btwn management judgements and auditor
Inappropriate selection or application of population based on sampling considers unreasonable or selection and application of
accounting policies accounting principals in inappropriate

AUDIT RISK MODEL Financial Statements Control Environment

AR = RMM x DR
Audit Risk = Risk of Material Misstatement x Detection Risk Account Balances
Class of transactions Assertion
RMM = IR x CR Disclosures
Risk of Material Misstatement = Inherent Risk x Control Risk

Inherent Risk Detection Risk Auditor Evidence Hierarchy

high volume transactions risk auditor misses the mistake and
A Auditor Personal Knowledge
complex calculations gives wrong opinion
amounts derived from estimates
cash Inverse to RMM E External Evidence
new technology = obsolete products If RMM high (more risk), DR low
lack of working capital If RMM low (less risk), DR high
I Internal Evidence
decline of economy or industry
EFFECT on NET
Control Risk RMM high/ DR low = cast a wide O Oral Evidence
risk not prevented or detected and corrected on a timely basis NET
function of effectiveness of design and operation of internal N = more outside confirmations
controls E = larger sample size
U
HIGH if* T = Year end
*no effective controls relative to specific assertion
implemented controls are not operating effectively RMM low/ DR high = less work
not be efficient to test operating effectiveness of controls
 Assertions & Materiality & Risk
Significant risk - based on INHERENT RISK ONLY regardless of control risk
TESTING
Substantive Combination Control

no effective controls if relying on operating

control ineffective effectiveness, test of controls
not efficient to test operating effectiveness must be preformed in current
period
Misstatements
Trivial Immaterial Material
Do nothing Accumulate Accumulate
Individually Individually
Aggregate Aggregate
Whole FS Whole FS
Specific Accts Specific Accts
Disclose Disclose
Qualitative Qualitative
Quantitative Quantitative
Document:
summary of uncorrected errors and conclusion doesn’t materially misstate
Aggregate effect on FS
materiality levels exceeded
effect on key ratios
 Quality Control
Quality Control
HELP ME Partner Review:
Human Resources Critical Area of Judgements
Engagement/ Client acceptance and continuance Significant Risks
Leadership Responsibilities What engagement documents
Performance of the engagement Who performed work and dated
Monitoring Who reviews and dated
Ethical Requirements

Performance of the engagement Human Resources

Policies and Procedures: Policies and Procedures:
Supervision Right people, right job
Review Continuing Education

Leadership Responsibilities
Engagement/ Client acceptance and continuance
Policies and Procedures:
Policies and Procedures:
"Tone at the Top" = CRIME
Accept reasonable expectation to complete with
Control Environment
competence
Risk Assessment
Information System
Monitoring Monitoring
Policies and Procedures:
Ongoing consideration and evaluation of design Ethical Requirements
Inspections (Peer Review) [every 3 years] Policies and Procedures:
Partner responsible for process Independence in fact and appearance

Audit Documentation
Document Req'mts
Planning, conducting and supervising audit
Reconcile to FS
Justification for departure
Audit Program (detailed procedures)
Management rep letter
Original responses
Significant agreements
Significant findings

Report Release date = auditor grants client permission to use report

SAS = 5 Years
PCAOB = 7 Years

Complete Workpapers
SAS = 60 day grace period
PCAOB = 45 day grace period

Permanent File Current File

Articles of Incorporation Current year documents
Board Meetings Significant Findings
Contracts Control tests
Substantive tests
 Quality Control
Client Acceptance

Shareholders Board of Directors Functions:

Establish control environment
select & appoint auditor
review the quality of auditor's work
Audit Committee review scope of audit
(req'd by PCAOB) respond to auditor recommendations
*Subgroup members of BOD help resolve disagreements related to
3-5 outside directors not mgmt. accounting treatment of material
items
HIRES bridge between auditor and BOD
Management External Auditor

Internal Auditor Specialist

Inquiry of Predecessor Auditor Internal Audit Function

Management Integrity Competence
Disagreements Who they report to
Reason for change application of systematic & disciplined
Communications regarding fraud and approach
noncompliance

Review prior workpapers

Engagement Letter Use of specialist

Objective and Scope Understand:
Responsibilities of Auditor field of expertise
Responsibilities of Management competence & capabilities
Inherent limitations of an audit objectivity
Applicable framework
Reference to expected content of forms May ref specialist for Issuers if CAM - may
Timing need permission
Fees and billing arrangements
 Quality Control
Req'd Communications to Governance
Auditors Responsibility Planned Scope and Timing
Expressing opinion May
Internal control part of planning Significant risk will be addressed
Audit doesn't relieve management of their Planned approach towards IC
Materiality factors
Addt'l Rqm'ts for Issuers use of internal audit staff
All critical accounting policies solicit information
material alternative GAAP accounting discuss attitudes, awareness of governance
treatments
Significant Audit Findings
other material communications
views on qualitative aspects of accounting policies
discuss and provide draft of auditor report
significant difficulties
Significant Deficiencies & Material uncorrected, non trivial misstatements
Weakness
within 60 days of report release date *if not involved in management communicate
prev communicated not corrected state again material corrected misstatements
Mgmt. only - other deficiencies mgmt. representations
auditor may not report lack of sign. def, but mgmt. consultations with other auditors
can report lack of mat. weakness significant issues discussed with mgmt.
 Code of Prof Conduct
AICPA Code of Professional Conduct Conceptual Framework for Independence
Public Member in Retired Threats to
Rule Notes Practice Business Unemployed Compliance AICPA GAGAS
Impaired: Direct financial interest
audit fees unpaid more than year
mgmt. position
hiring decisions
Independence litigation  Adverse Interest
Integrity & Objectivity free of conflicts   Advocacy
Professional Competence
Due Professional Care
Adequate Planning & Supervision
General Standards Sufficient Relevant Data   Familiarity
Management
Compliance with Standards   Participation
Accounting Principal   Self-Interest
Allowed: client consent
quality control review
Confident Client subpoenaed
Information prospective CPA is confidentiality assured  Self-Review

Allowed: compilations if lack of independence is disclosed

Contingent Fee examination of tax return by IRS  Undue Influence
Retaining client records
Discrimination
Failure to follow standards
Negligently making JE
Failure to file timely tax returns or remit PR taxes
Soliciting or disclosure of CPA ?
Misleading claim on ability to perform services
Acts Discreditable disclose confidential information without consent    Bias
Advertising/Solicitation  Structural
Commissions and Referral
Fee 
All CPA owners must be AICPA if designated
can't be CPA unless all owners are
can use past owners names
if all other partners died may operate for 2 yrs. before
Form and Organization becoming sole prop. 
 Code of Prof Conduct
Public Member in Retired Threats to
Rule Notes Practice Business Unemployed Compliance AICPA GAGAS
SOX limits:
Maintain records 7 years
Prohibited Services:
Bookkeeping
Financial information design and implementation
appraisal and valuation
actuarial
mgmt. functions
HR services
Internal audit
services as broker/dealer
legal services
expert service
no confidential or aggressive tax position advice
no tax services to corporate officers of audit client
no loans