Learning ObjectivesLO1 Describe the association framework.LO2 Determine whether a PA is associated with

financial statements.LO3 Describe the three levels of assurance.LO4 Compare and contrast the scope and opinion

paragraphs in an independent auditor’s report.LO5 For a given set of accounting facts and audit

circumstances, analyze qualified, adverse, and disclaimer audit reports.

LO6 Determine the effects of materiality and uncertainty on audit report choices.

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Standard Unqualified ReportThe standard unqualified report contains four basic segments:

The introductory paragraph. Management responsibility paragraph. Auditor responsibility paragraphs. The opinion paragraph.

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The Standard ReportIntroductory ParagraphAuditor’s report

To the Shareholders of ………

We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as of December 31, 20x1 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

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Introductory ParagraphThe first paragraph of the standard unqualified report:

Indicates that an audit was conducted. Identifies the financial statements audited.

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Management’s Responsibility ParagraphManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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Auditor’s Responsibility ParagraphsOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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Auditor’s Responsibility Paragraphs (Continued)An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Auditor’s Responsibility ParagraphsThese paragraphs are the auditor’s report of the nature of the work in the audit.In accordance with GAAS refers to the general and examination standards.

Auditors were trained and proficient. Auditors were independent. Due professional care was exercised. The work was planned and supervised Sufficient understanding of controls was obtained. Sufficient appropriate evidence was obtained.

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Audit Report Opinion ParagraphIn our opinion, the financial statements present fairly, in all material respect the financial position of ABC Company as of December 31, 20x1, and of its financial performance and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

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City

Date

(Signed)

Public Accountant

Opinion ParagraphThe final paragraph contains the auditors’ conclusions on the statements.

Financial statements are presented fairly in all material respects in accordance with GAAP.

Disclosure is adequate (implicit assertion). Provide an expression of opinion.

No reasons for giving the opinion need to be expressed.

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