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Hi sir, being confuse with the question require element of audit report and type of report. type and element are not the same?
Elements =
Audit report
To the members
Directors responsibilities
Auditors responsibilities and type of assurance given
Basis of opinion
Opinion
Signature and date.Type of audit report = opinion: unmodified, qualified, adverse, disclaimer
Also emphasis of matter paragraph
Thanks,
There is another question, is qualified report refer as modified report ?And about the material and pervasive or material not pervasive on report, how we know that the misstatements will affect the financial statements? Is it using the 5% on profit and 10% on total asset method?
For your first question see here: https://opentuition.com/topic/audit-report-explanations/
The normal guidance about materiality is 1/2 – 1% turnover, 1 – 2% total assets or 5 – 10% profit.
There is no guidance on when a material item becomes pervasive. However, pervasive is really saying that the are such big problems in the FS that they are a waste of paper.
Ok, the material and pervasive can I interpret as it is too material that it will affect the liquidity of one company?
Not really. Pervasive means affecting everything. Simply overstating receivables, whilst affecting liquidity, would not necessarily be pervasive as the misstatement could be limited to receivables. If liquidity was so bad that the company faced imminent liquidation then the error would be pervasive because the FS should not be drawn up on a going concern basis.
In general, auditors are reluctant to go down the pervasive route and to end up with either a disclaimer or an adverse opinion. Those both mean that the FS are worthless and give little information to shareholders.
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