Components of unqualified report

Answer 1

Seven Parts of a Standard Unqualified Audit Report

The seven parts of a standard unqualified audit report are the title, addressee, introductory paragraph, scope paragraph, opinion paragraph, name of auditor (CPA firm), and date of report. Following is a description of the contents of each part.

1. Title - Public company reports are required to begin with a title that references the "Independent Registered Public Accounting Firm". Reports for nonpublic companies may contain titles such as "Independent Auditors Report, or "Report of the Independent Auditor".

2. Addressee - This is the individual, group, entity, board of directors, and/or stockholders who retained the services of the auditor. 3. Introductory Paragraph - This paragraph must state three things: "which financial statements are covered by the report, that the statements are the responsibility of management, and that the auditor has a responsibility to express an opinion" (Messier et al., 2006, p. 50). 4. Scope Paragraph - This paragraph states what is involved in the audit. For public companies the scope paragraph states that the audit was performed in accordance with Public Company Accounting Oversight Board (PCAOB) standards, and for nonpublic companies it states that the audit was performed in accordance with generally accepted auditing standards (GAAS). The scope paragraph must also state "that the audit provides only reasonable assurance that the financial statements contain no material misstatements,...that an audit involves an examination of evidence on a test basis,... 5. Opinion Paragraph - This paragraph expresses the auditor's opinion in regard to the fairness of the financial statements based upon evidence obtained through the audit.

6. Name of Auditor - This is the name of the CPA firm that conducted the audit, along with a manual or printed signature of the auditor.

7. Date of Report - This is "the date on which the auditor has completed all significant auditing procedures" (Messier et al., 2006, p. 52). Circumstances that Prevent Issuance of an Unqualified Report

There are three specific circumstances that would prevent external auditors from issuing an unqualified report: scope limitation, departure from GAAP, and lack of independence of the auditor. Scope limitation results from the inability to gather adequate evidence. Departure from GAAP results from the fact that a departure from generally accepted accounting principles affects the financial statements. Lack of independence of the auditor refers to the fact that the auditor is not independent of the entity that he or she is auditing.