Auditors Reports- referencing other matters

Auditors Reports- referencing other matters

1. Consistency

   • Changes in accounting principles
     • Any year
     • One GAAP method to another GAAP method
     • The form of the reporting entity
     • Non GAAP to GAAP method
     • Inseparable from changes in estimates
     • May result in issuance of new standards
   • Adjustments to correct misstatements
     • Previously issued financial statements

2. "Going concern"

   • Principle: Entity is expected to continue in operation
     • Without disposing of assets
   • Uncertainties: If substantial doubt about client's ability to continue going
     • Issue unqualified opinion
       • With explanatory paragraph
     • Should not ignore signs of financial difficulty
       • Financial flexibility= mitigating factors

3. Justified Departures from GAAP

   • Permissible if client shows financial statements would have been misleading due to GAAP
     • Rare instance
     • Unqualified opinion given if auditor agrees

4. Group financial statements

   • Division, subsidiary, other segment
     • Obtain information about independence and professional reputation
       • Decide whether to work in a group of other auditors
       • Division of responsibility
         • Must decide what opinion to give
   • Not common for largest accounting firms

5. Other modifications

   • Adding more content to emphasize something
     • Describe circumstances that present risk