About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
3 3 1 Audit Report Content Explained

3 1 Audit Report Content Explained

Key Concepts

Audit Report

An audit report is a formal document issued by an independent auditor at the completion of an audit. It communicates the auditor's opinion on whether the financial statements are prepared in accordance with the applicable financial reporting framework.

Standard Audit Report

The standard audit report is the most common type of audit report. It includes an unmodified opinion and follows a structured format. It typically consists of the following sections: introductory paragraph, management's responsibility, auditor's responsibility, audit opinion, and auditor's signature.

Example: A standard audit report might state, "In our opinion, the financial statements present fairly, in all material respects, the financial position of the company as of December 31, 2022."

Unmodified Opinion

An unmodified opinion, also known as an unqualified opinion, indicates that the financial statements are free from material misstatement and are presented in accordance with the applicable financial reporting framework. This is the most favorable opinion an auditor can give.

Example: "In our opinion, the financial statements present fairly, in all material respects, the financial position of the company as of December 31, 2022."

Modified Opinion

A modified opinion is issued when the auditor identifies a material weakness or limitation in the financial statements, but the overall financial statements are still considered to be fairly presented. There are two types of modified opinions: qualified opinion and adverse opinion.

Example: A qualified opinion might state, "Except for the matter discussed in the following paragraph, in our opinion, the financial statements present fairly, in all material respects, the financial position of the company as of December 31, 2022."

Adverse Opinion

An adverse opinion is issued when the auditor concludes that the financial statements as a whole are materially misstated and do not present fairly the financial position, results of operations, and cash flows in accordance with the applicable financial reporting framework.

Example: "In our opinion, because of the significance of the matter discussed in the following paragraph, the financial statements do not present fairly the financial position of the company as of December 31, 2022."

Disclaimer of Opinion

A disclaimer of opinion is issued when the auditor is unable to gather sufficient appropriate audit evidence to form an opinion on the financial statements. This typically occurs when there is a limitation on the scope of the audit.

Example: "Because of the significance of the matter described in the following paragraph, we do not express an opinion on the financial statements."

Emphasis of Matter Paragraphs

Emphasis of matter paragraphs are used to draw the reader's attention to a matter that is significant but does not affect the auditor's opinion. These paragraphs are included in the audit report but are clearly distinguished from the auditor's opinion.

Example: "Without qualifying our opinion, we draw attention to Note X to the financial statements, which describes the uncertainty related to the company's ability to continue as a going concern."

Other Matter Paragraphs

Other matter paragraphs are used to communicate information that is relevant to the reader but does not relate to the financial statements under audit. These paragraphs are also included in the audit report but are clearly distinguished from the auditor's opinion.

Example: "As discussed in Note Y to the financial statements, the company has entered into a significant agreement that may have future financial implications."

Examples and Analogies

Consider the audit report as a "report card" for the financial statements. The standard audit report is like a "passing grade" with no issues. An unmodified opinion is the "straight A" report card, indicating no problems.

A modified opinion is like a "conditional pass" where there are minor issues that need attention. An adverse opinion is a "failing grade" indicating significant problems. A disclaimer of opinion is like "incomplete" due to insufficient information.

Emphasis of matter paragraphs are like "footnotes" that highlight important information without affecting the overall grade. Other matter paragraphs are like "additional comments" that provide extra context but are not part of the main report.

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