[Anonymous]

So I came across this simulation in a practice test. You just choose what opinion/action you would do, as the auditor, in X situation. This is for an audit of internal control.

The auditors concluded that the ineffectiveness of the design of controls over accounts payable and cash disbursements represents a material weakness in internal control even though the financial statements are not materially misstated.

And the answer is: Express an adverse opinion on the internal controls.

Which I understand. But if this was just an audit on the financial statements, and not specifically internal control, what would happen? How would the report differ?

[msgolds]

If you are not performing an audit of internal controls, you would not express an opinion on internal controls. You might perform specific tests of controls in order to reduce your detail testing, but it is all to support your audit of financial statements.

That being said, any significant deficiencies or material weaknesses in internal controls encountered during performance of the audit need to be communicated to those charged with governance.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[Anonymous]

My understanding is that if the auditor determined that they could not rely on the internal controls, then they would assess the control risk at the max and increase substantive testing.

[Rukus]

msgolds <<<< nailed it

FAR - 81 (8/31/12)
AUD - 93 (10/19/12)
BEC - 79 (11/27/12)
REG - 92 (2/8/13) DONE! All 1st attempt!

[msgolds]

Yes, exactly. If you cannot replace reliance on internal controls, you assess maximum control risk and increase substantive testing accordingly.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[Anonymous]

OK…got it. Thanks so much!

[yuyi325]

One more thing, if it's an audit of non issuer(it should be, because if it is an issuer you have to provide an opinion on internal control)

The communication of significant deficiencies and material weakness to audit committee should be within 60 days from report release date.

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[Anonymous]

yuyi325, now I am a little confused again.

If it is an audit of an issuer, you automatically express an opinion on the internal control, right? So if there is material weakness found in the internal control and the financial statements are NOT materially misstated…then what? Is the opinion on the FS unqualified but you have to separately report on the internal control weakness? Do I have that right? This is for an integrated audit (so all audits of issuers would automatically be an integrated audit)?

[msgolds]

@dante, you're spot on. In an integrated audit you express two separate opinions, one on the internal controls and one on the financial statements. You could have an unqualified opinion on the financial statements but still report material weaknesses in internal controls.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[yuyi325]

There is two separate reports for financial statement and internal control in an integrated audit of non-issuer. Actually this kind of audit doesn't required a report on internal control, unless significant deficiency or material weakness founded.

You can give an unqualified opinion on financial statement and report material weakness because material weakness in internal control doesn't mean material misstatement in financial statement.

Sorry to confuse you.

To msgolds, I think an integrated audit for non-issuer just provide one opinion, which is on financial statement. The report on internal control is just a communication. It doesn't provide any positive or negative assurance on the internal control effectiveness. Actually it should disclaim a opinion on internal control in this report to audit committee.

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[Anonymous]

Thank you both! I understand now.

[Anonymous]

@yuyi325

I'm a little confused by two of your phrases here: “There is two separate reports for financial statement and internal control in an integrated audit of non-issuer.” and ” I think an integrated audit for non-issuer just provide one opinion, which is on financial statement.” Aren't they contradict each other? And also saying this: ” Actually it should disclaim a opinion on internal control in this report to audit committee.” did you mean disclaim or adverse opinion b/c of material weakness? I thought that when we see material misstatements/weakness we express an adverse opinion. Tell me where I'm wrong b/c I don't want to be confused:))

[yuyi325]

To CPA_NY

Here is the premise, it is an integrated audit for non-issuer. (Not an integrated audit for issuer and not an attest engagement)

If you find significant deficiency or material weakness during audit, you have to give a report to audit committee in 60 days after report release.

But in this report, you should disclaim an opinion on the effectiveness of internal control. You just give the audit committee your findings, you don't give any assurance on it.

And if you don't find significant deficiency or material weakness, you don't have to report.

But as I said above, the premise is integrated audit for non-issuer. If it's an integrated audit for issuer or it's an attest engagement on internal control for non-issuer, you have to give opinion in your report. As you said, if material weakness founded, adverse opinion.

Hope it's clear enough.

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[yuyi325]

I'm soooooooo sorry to everyone!

I'm sorry to confuse you. I used the wrong words. There should be two kind of audit: 1. financial statement audit (nonissuers) 2. Integrated Audits (nonissuers and issuers)

The first one is what I said above.

The second we should give opinion for both of non-issuer and issuers.

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[yuyi325]

SORRY!!!!!!!! Please ignore what I said.

Please please forgive me!!

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[yuyi325]

All I said “integrated audit for non-issuer” means “financial statement audit for non-issuer”.

Feel so guilty to confuse all of you~ : (

FAR(10/13/2011) 96
BEC(11/28/2011) 89
REG(10/30/2012) 86
AUD(11/30/2012) 93
Thank God!!

[Author]

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