audit reports

a guarantee. The intent is to indicate that the conclusions are based on professional
judgment. The phrase in our opinion indicates that there may be some information risk
associated with the financial statements, even though the statements have been
audited.
The opinion paragraph is directly related to the first and fourth generally accepted
auditing reporting standards listed on page 34. The auditor is required to state an opinion
about the financial statements taken as a whole, including a conclusion about
whether the company followed U.S. generally accepted accounting principles.
One of the controversial parts of the auditor’s report is the meaning of the term
present fairly. Does this mean that if generally accepted accounting principles are followed,
the financial statements are presented fairly, or something more? Occa sionally,
the courts have concluded that auditors are responsible for looking beyond generally
accepted accounting principles to determine whether users might be misled, even if
those principles are followed. Most auditors believe that financial statements are “presented
fairly” when the statements are in accordance with generally accepted accounting
principles, but that it is also necessary to examine the substance of transactions and
balances for possible misinformation.
6. Name of CPA firm. The name identifies the CPA firm or practitioner who performed
the audit. Typically, the firm’s name is used because the entire CPA firm has the
legal and professional responsibility to ensure that the quality of the audit meets professional
standards.
7. Audit report date. The appropriate date for the report is the one on which the
auditor completed the auditing procedures in the field. This date is important to users
because it indicates the last day of the auditor’s responsibility for the review of significant
events that occurred after the date of the financial statements. In the audit report
in Figure 3-1, the balance sheet is dated December 31, 2007, and the audit report is
dated February 15, 2008. This indicates that the auditor has searched for material
unrecorded transactions and events that occurred up to February 15, 2008.
INTERNATIONAL AUDIT
OPINIONS
The standard unqualified audit report described in
the preceding section is based on auditing standards
generally accepted in the United States. Reporting in
other countries is based on auditing standards in
those countries. For example, the opinion paragraph
from an audit report issued in the United Kingdom is
as follows:
In our opinion the financial statements give a true
and fair view, in accordance with IFRSs as adopted
by the European Union, of the state of affairs of
the company at 31st December 2007 and of the
profit and cash flow of the company for the year
then ended and have been properly prepared in
accordance with the United Kingdom Companies
Act of 1985 and Article 4 of the IAS Regulation.
Conditions for Standard
Unqualified Audit Report
OBJECTIVE 3-2
Specify the conditions required to
issue the standard unqualified
audit report.
The standard unqualified audit report is issued when the following conditions have
been met:
1. All statements—balance sheet, income statement, statement of retained earnings,
and statement of cash flows—are included in the financial state ments.
2. The three general standards have been followed in all respects on the engage -
ment.
3. Sufficient appropriate evidence has been accumulated, and the auditor has
conducted the engage ment in a manner that enables him or her to con clude
that the three standards of field work have been met.
4. The financial statements are presented in accordance with U.S. generally
accepted accounting prin ciples. This also means that adequate disclosures have
been included in the footnotes and other parts of the financial state ments.
5. There are no circumstances requiring the addition of an explanatory paragraph
or modification of the wording of the report.
48 PART ONE / THE AUDITING PROFESSION