[professionalskeptic]

“The objective of our audit is to express an unmodified opinion on the financial statements although it is possible that facts or circumstances encountered may preclude us from expressing an unmodified opinion.” What is the most likely source of this statement?

A.

Auditor’s engagement letter

Incorrect B.

Auditor’s communication with the audit committee

C.

Auditor’s report

D.

Letter for underwriters

Correct answer: A

The auditor’s engagement letter should address such matters as the objective of the engagement and, therefore, would include a statement such as, “The objective of our audit is to express an unmodified opinion on the financial statements although it is possible that facts or circumstances encountered may preclude us from expressing an unmodified opinion.”

My question: isn’t it unethical and also illegal to audit FS with the objective to issue an unmodified opinion?

FAR - 11/18/15 - 74, 04/29 - 70 overworked myself to the last day and was burnt out at the exam.
AUD - 01/18/16 - 74 AGAIN FML, retake - only going to schedule when I feel happy with my prep.

[Missy]

It's the goal of every audit to pass. There's nothing unethical or illegal about that. You're not going to go in saying it's your objective to find deficiencies.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Hammer]

It's not unethical or illegal, but I do agree that it is not the objective of an audit and that is a poorly worded question.

Believe the objective of an audit of financial statements is to obtain sufficient evidence in order to render an opinion on the financial statements.

FAR - 70, 81
AUD - 83
BEC - 77
REG - 70, 78

Licensed in Ohio.

Now what the hell do I do?

[Anonymous]

I'd try to think of it this way: what are the procedures trying to prove? I would say that they're trying to prove that the financial statements don't contain material misstatements, which would mean that your goal is to reach the point that you can issue a clean audit opinion.

Now if the question was a “fill in the blank” type and the prompt was “The goal of an audit is to ____” I would fill it in with something more like “assess risk of material misstatement”, not “determine there are no material misstatements”, so I think my view of an audit would agree more with what it sounds like you're thinking. However, if you think about what all the audit procedures are trying to “prove”, they're trying to “prove” that there's not material misstatements.

[FIFOisbetterthanLIFO]

Last engagement letter I got in the “real world” said “we cannot provide assurance that an unmodified opinion will be expressed”. It is a standard piece of text taken from those that write the audit standards. So I do agree with what others have said that it is a poorly worded question.

You will find that audit reports, engagement letters, etc all follow templates that have been accepted as standard language in the public accounting industry. Partners don't craft this language. It doesn't take a rocket scientist to write up a report in the real world because you have so many restrictions and must adhere to the AU (GAAS).

FAR - Passed (82)
BEC - Passed (76)
AUD - Passed (89)
REG - Passed! (81)
AICPA Ethics

Licensed CPA

[professionalskeptic]

I'm hoping it indeed is a poorly worded question because I see an objectivity problem with wording the engagement letter like that because even before the audit has started you're going in with the intent to issue an unmodified opinion. An audits intent should be to find if the financials are representative of the position of the company and fairly present the situation. They may, or may not. I would word this sentence like @MCHammer did.

@fifoisbetterthanlifo That is a good sentence to put in an engagement letter because you're letting your client know that hey, just because you're paying me, I'm not going to issue and unmodified opinion.

FAR - 11/18/15 - 74, 04/29 - 70 overworked myself to the last day and was burnt out at the exam.
AUD - 01/18/16 - 74 AGAIN FML, retake - only going to schedule when I feel happy with my prep.

[Author]

Replies