Example auditing case 1)” Based on the information given in this case and your knowledge of auditor’s reports, identify the deficiencies in the draft of the proposed report. Do not redraft the report, but provide justification or explanation for each of the deficiencies you identify” (Pany, Auditor’s Report, 2010). A. In the Introduction paragraph it states “As discussed in Note K to the financial statements, the Company has properly disclosed a subsequent event dated March 14, 20×9” (Pany, Auditor’s Report, 2010).
This does not belong in this section of the report; it belongs below the scope paragraph. The introduction paragraph is to “clarify the responsibilities of management and the auditors” (Pany, Professional Standards, 2010). B. In the opinion paragraph it states, “except for the matters discussed in the first and the final paragraphs of this report” (Pany, Auditor’s Report, 2010). In the auditor report they do not refer back to the exception of the report. The opinion paragraph is to consist of only one sentence which is a restatement from previous paragraphs and includes the opinion of the auditors.
C. In the opinion paragraph it states, “the financial statements referred to above present fairly in all material respects” (Pany, Auditor’s Report, 2010). Since this audit was concluded to have an adverse opinion, the report should not state fairly presented, but not fairly presented. The use of presented fairly refers to an unqualified opinion. D. In the opinion paragraph it states, “applied on a basis consistent with that of the proceeding year” (Pany, Auditor’s Report, 2010). To me this is just excessive words to make the report longer.
We are not auditing 20×7 financial statements but 20×8 financial statements so there is no need to refer back to that year. The opinion paragraph is to consist of only one sentence which is a restatement from previous paragraphs and includes the opinion of the auditors. E. At the bottom of this report it states, “As discussed in Note G to the financial statements, the Company carries its property and equipment at appraisal values and provides depreciation on the basis of such values.
Further, the company does not provide for income taxes with respect to the differences between financial income and taxable income arising because of the use, for income tax purposes, of the installment method of reporting gross profit from certain types of sales. ” (Pany, Auditor’s Report, 2010). This statement belongs below the scope paragraph. This statement should also be broken down into two different notes relating to the financial statements because they refer to two different areas of the statements. F. At the bottom of this report it states, “We believe that these appraisal values are reasonable” (Pany, Auditor’s Report, 2010).
This does not belong here because they do not want your opinion in this area. 2) “Explain how you would correct each of the deficiencies you identified in requirement 1” (Pany, Auditor’s Report, 2010). Refer back to question 1 the errors found in the report. A. I would omit this statement and place it below the scope paragraph of the report B. I would omit this statement completely. C. I would replace the statement with the following statement: Because of the effects of the matters discussed in the preceding paragraph, the financial statements referred to above are not fairly presented in all material respects D.
I would omit this statement completely. E. These statements need to be placed below the scope paragraph and broke down into two different notes referring back to the financial statements. F. I would omit this statement completely. 3) “Explain the meaning of an adverse opinion and in general the circumstances in which an adverse opinion is required” (Pany, Auditor’s Report, 2010). An adverse opinion is rare to get ,and it contains in the financial statements material departures that do not adhere to the generally accepted accounting principles, and the auditor believes that this causes the financial statements to be misleading.
If a company fails to consolidate with a material subsidiary, the financial information is materially incorrect, unreliable, and inaccurate in order to assess the company’s financial position and results of operations. Works Cited Pany, R. W. (2010). Auditor’s Report. In R. W. Pany, Principles of Auditing & Other Assurance Services (pp. 681-682). New York: McGrwa-Hill/Irwin. Pany, R. W. (2010). Professional Standards. In R. W. Pany, Principles of Auditing & Other Assurance Services (pp. 41-46). New Yorl:
