After the assembly of the final audit file has been completed, the auditor should not delete or discard audit documentation before the end of its retention period. When the auditor finds it necessary to modify existing audit documentation or add new audit documentation after the assembly of the final file has been completed, the auditor should, regardless of the nature of the modifications or additions, document:.
The requirements of the ISA guide the auditor to produce audit documentation that is of an acceptable standard. Understanding and applying the requirements will protect the auditor from unwelcome and unnecessary litigation.
Before deciding to prepare a particular audit working paper, the auditor should be satisfied that it is:. Certain working papers required by the auditor may have already been prepared by client staff. The auditor should make arrangements, whenever possible, for copies of these to be made available to the audit team.
If client staff prepare working papers which are to be retained by the auditor, the auditor should agree the form of the working papers with client staff at an early stage in the audit, and include this information in the audit timetable. When arranging for working papers to be prepared, the auditor should take care to ensure that the working papers will give all the information required.
All such working papers should normally be clearly identified as having been prepared by the client. The member of audit staff directly responsible for an audit area in which working papers prepared by client staff are included should sign those papers — this will show that they have been checked and that they can be reviewed by the manager and the partner, and by subsequent reviewers.
On the basis of the discussion above, a good working paper should meet the requirements of ISA by displaying the following characteristics:. The reviewer of audit working papers should ensure that every paper has these characteristics.
If any relevant characteristic is judged absent, then this should result in an audit review point ie a comment by the reviewer directing the original preparer to rectify the fault on the working paper. Working papers provide evidence that an effective, efficient, and economic audit has been carried out.
They should therefore be prepared with care and skill. They should be sufficiently detailed and complete so that an auditor with no previous experience of that audit can understand the working papers in terms of the work completed, the conclusions reached, and the reasoning behind these conclusions. Below are the most common types of reports issued for companies. A clean report means that the company's financial records are free from material misstatement and conform to the guidelines set by GAAP.
A majority of audits end in unqualified , or clean, opinions. A qualified opinion may be issued in one of two situations: first, if the financial statements contain material misstatements that are not pervasive; or second, if the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion, but the possible effects of any material misstatements are not pervasive.
For example, a mistake might have been made in calculating operating expenses or profit. Auditors typically state the specific reasons and areas where the issues are present so that the company can fix them. An adverse opinion means that the auditor has obtained sufficient audit evidence and concludes that misstatements in the financial statements are both material and pervasive.
An adverse opinion is the worst possible outcome for a company and can have a lasting impact and legal ramifications if not corrected. Regulators and investors will reject a company's financial statements following an adverse opinion from an auditor. Also, if illegal activity exists, corporate officers might face criminal charges.
A disclaimer of opinion means that, for some reason, the auditor is unable to obtain sufficient audit evidence on which to base the opinion, and the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. Examples can include when an auditor can't be impartial or wasn't allowed access to certain financial information. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 29, , and September 30, , and the results of its operations and its cash flows for each of the three years in the period ended September 29, , in conformity with accounting principles generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Starbucks Corporation. Investing Essentials. Career Advice.
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What Should Be in an Audit Report? The audit report generally includes the following elements: Scope and objectives must. Results must. Recommendations and action plans must. Conclusions must. Opinion should. Acknowledgment of satisfactory performance encouraged.
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