audit
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 August 2010
what is meant by qualification of audit report?
09 August 2010
qualified audit report An audit report in which some qualification of the financial statements is required because the auditor feels there is a limitation on the scope of the audit examination or because the auditor disagrees with the treatment or disclosure of a matter in the financial statements. The type of qualification used will depend upon the degree of materiality of the limitation or disagreement. If the limitation of scope is very material
09 August 2010
Qualified audit reports --
It is necessary to firstly identify the circumstances which can give rise to a qualification.
These are as follows:
Uncertainty arising from either a limitation upon the scope of the auditors work or an inability to obtain any evidence regarding doubts which exist in relation to an unresolved matter.
Disagreements arising from factual discrepancies, unsuitable accounting policies, inadequate or misleading disclosures given in the financial statements or failure to comply with an accounting standard or legislation. Some of these types of disagreement should be resolved fairly easily with the client so that a qualification can be avoided, for example a factual disagreement should lead to the financial statements being amended to reflect the correct view. Other types of disagreement which are perhaps more subjective will be much more difficult to resolve such as those relating to the suitability of an accounting policy.
Secondly, it is necessary to decide upon the effect of the circumstances discussed above.
These are classified as:
those having a material but not fundamental effect upon the financial statements;
those having a fundamental effect upon the financial statements.
Fundamental means that the matter is such as to seriously distort or undermine the view which is given by the financial statements to the extent that they could mislead user groups.
An except for qualification will be given when the matter is a material but not fundamental uncertainty or disagreement. An example of an uncertainty could be the destruction of a part of the clients accounting records leading to a limitation of scope being imposed upon the auditors work because audit evidence is then unavailable. An example of a disagreement under this heading could be a failure by a client to apply a reasonable depreciation policy to a particular class of fixed assets, however in both of these examples the effect is not pervasive to the view which the financial statements give as a whole.
An adverse opinion indicating that the financial statements do not give a true and fair view and/or do not comply with the Companies Act 1956 will be given when the matter concerned gives rise to a fundamental disagreement.
A �disclaimer opinion will be given in the event of a fundamental uncertainty and the auditors report will indicate that an opinion cannot be given.
Finally it is important to note that qualification only occurs in relation to material items.
It is necessary to firstly identify the circumstances which can give rise to a qualification.
These are as follows:
Uncertainty arising from either a limitation upon the scope of the auditors work or an inability to obtain any evidence regarding doubts which exist in relation to an unresolved matter.
Disagreements arising from factual discrepancies, unsuitable accounting policies, inadequate or misleading disclosures given in the financial statements or failure to comply with an accounting standard or legislation. Some of these types of disagreement should be resolved fairly easily with the client so that a qualification can be avoided, for example a factual disagreement should lead to the financial statements being amended to reflect the correct view. Other types of disagreement which are perhaps more subjective will be much more difficult to resolve such as those relating to the suitability of an accounting policy.
Secondly, it is necessary to decide upon the effect of the circumstances discussed above.
These are classified as:
those having a material but not fundamental effect upon the financial statements;
those having a fundamental effect upon the financial statements.
Fundamental means that the matter is such as to seriously distort or undermine the view which is given by the financial statements to the extent that they could mislead user groups.
An except for qualification will be given when the matter is a material but not fundamental uncertainty or disagreement. An example of an uncertainty could be the destruction of a part of the clients accounting records leading to a limitation of scope being imposed upon the auditors work because audit evidence is then unavailable. An example of a disagreement under this heading could be a failure by a client to apply a reasonable depreciation policy to a particular class of fixed assets, however in both of these examples the effect is not pervasive to the view which the financial statements give as a whole.
An adverse opinion indicating that the financial statements do not give a true and fair view and/or do not comply with the Companies Act 1956 will be given when the matter concerned gives rise to a fundamental disagreement.
A �disclaimer opinion will be given in the event of a fundamental uncertainty and the auditors report will indicate that an opinion cannot be given.
Finally it is important to note that qualification only occurs in relation to material items.
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