Review and Reporting
The audit report
Know the structure of the unmodified opinion report: title, addressee, opinion, basis for opinion, going concern section, key audit matters (for listed entities), responsibilities of management and auditor, and signature/date. The opinion is on whether statements are prepared, in all material respects, in accordance with the applicable framework.
Modifications
Distinguish a modified opinion (qualified, adverse, disclaimer) from an emphasis of matter or other matter paragraph, which do not change the opinion. A qualified opinion arises from material but not pervasive misstatement or scope limitation; adverse for pervasive misstatement; disclaimer for pervasive scope limitation.
Subsequent events and going concern
Adjusting events provide evidence of conditions at year-end; non-adjusting events arise after. For going concern, assess management's assessment and whether a material uncertainty exists.
Worked example
A client refuses to allow confirmation of a large receivable representing 40% of assets - a pervasive scope limitation, so a disclaimer is appropriate.
Traps
- Thinking an emphasis of matter changes the opinion - it does not.
- Confusing adjusting vs non-adjusting events.
- Forgetting the report is dated when the auditor has sufficient evidence, not when statements are approved.
- Missing that key audit matters apply to listed entities.