Question

a standard unqualified auditor's report for a Us public company contains 3 sections. list and describe them.

Answer 1

a standard unqualified auditor's report for a Us public company contains 3 sections which are (I) Opinion on financial statements (II) Basis of Opinion (III) Critical Audit matter

The Auditors unqualified Reports include;

(I)Basic Elements;

1. Tittle: The auditors report must include the tittle " Report on independent Registered Public accounting firm"
2. Addressee; The auditor's report must be addressed to the shareholders and the board of directors or equivalents.
3. Opinion on Financial Statements: The first section of the auditors report must include section tittle "Opinion on the financial statements" and the name of the company whose financial statements are audited, a statement identifying each financial statement and the related schedules if any, the date or period covered by each financial statement and related schedules, a statement indicating that the financial statements including the related notes and related schedules identified and collectively referred in the report as financial statements were audited,an opinion that the financial statements presents fairly in all material respects, the financial position of the company as of the balance sheet date and the results of its operations and its cash flows for the period then ended in conformity with the applicable financial reporting framework. The opinion should also include an identification of the applicable financial reporting framework.
4. Basis of opinion: The second section of the auditors report must include the section tittle "Basis of opinion" and the following elements,
   1. A statement that the financial statements are the responsibility of company's management
   2. A statement that the auditors responsibility is to express an opinion on the financial statements based on the audit
   3. A statement that the audit was conducted in accordance with the standards of the PCAOB
   4. A statement that the PCAOB standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements whether due to fraud or error
   5. A statement that the audit included; (a) performing procedures to assess the risks of material misstatement of the financial statements whether due to fraud or error and performing procedures that respond to those risks (b) Examining on a test basis evidence regarding the amounts and disclosures in the financial statements(c)Evaluating the accounting principles used and significant estimates made by the management and (d) Evaluating the overall presentation of the financial statements
   6. A statement that the auditor believes that the audit provides a reasonable basis for the auditor's opinion and
   7. A statement that the auditor is a public accounting firm registered with the PCAOB and is required to be independent with respect to the company in accordance with the U.S federal securities laws and the applicable rules and regulations of the SEC and the PCAOB
5. The auditors report must include the following elements;
   1. The signature of the auditors firm
   2. A statement containing the auditor began serving consecutively as company's auditor
   3. The city and state from which the auditors report has been issued
   4. The date of auditor's report

(II)Critical Audit matter;

1. The auditor must determine whether there are any critical audit matters in the audit of the current period's financial statements. A critical audit matter is any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. Critical audit matters are not a substitute for the auditor's departure from an unqualified opinion (i.e.., a qualified opinion, adverse opinion, or disclaimer of opinion on the financial statements as described in AS 3105).

2. In determining whether a matter involved especially challenging, subjective, or complex auditor judgment, the auditor should take into account, alone or in combination, the following factors, as well as other factors specific to the audit:

   1. The auditor's assessment of the risks of material misstatement, including significant risks;

   2. The degree of auditor judgment related to areas in the financial statements that involved the application of significant judgment or estimation by management, including estimates with significant measurement uncertainty;

   3. The nature and timing of significant unusual transactions and the extent of audit effort and judgment related to these transactions;

   4. The degree of auditor subjectivity in applying audit procedures to address the matter or in evaluating the results of those procedures;

   5. The nature and extent of audit effort required to address the matter, including the extent of specialized skill or knowledge needed or the nature of consultations outside the engagement team regarding the matter; and

   6. The nature of audit evidence obtained regarding the matter.

3. The auditor must communicate in the auditor's report critical audit matters relating to the audit of the current period's financial statements or state that the auditor determined that there are no critical audit matters.

4.       For each critical audit matter communicated in the auditor's report the auditor must:

   1. Identify the critical audit matter;

   2. Describe the principal considerations that led the auditor to determine that the matter is a critical audit matter;

   3. Describe how the critical audit matter was addressed in the audit; and

   4. Refer to the relevant financial statement accounts or disclosures that relate to the critical audit matter.

5. The following language, including the section title "Critical Audit Matters," should precede critical audit matters communicated in the auditor's report:

   • The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

6. In situations in which the auditor determines that there are no critical audit matters, the auditor should include the following language, including the section title "Critical Audit Matters," in the auditor's report:
   • Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
7.    For each matter arising from the audit of the financial statements that:
   • Was communicated or required to be communicated to the audit committee; and

   • Relates to accounts or disclosures that are material to the financial statements;