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Good afternoon Sir and many thanks for your help.
My apologies, my English is not good, but I’ll try to address my question.
I’ve a doubt related to the auditor opinion when he restate the previous FS.
Imagine that auditor A, as the new auditor of company xyz from the financial year 2013 he had to restate the balances of 2012 and 2011. Assuming that there is no material mistatements in 2013 and due to the restatement, the auditor concluded that the total asset of 2012 was overvalued and he had to correct it so that it went down in $ 1 million, total liabilities went down in $ 500.000 and the loss of the period increased in $ 800.000.
My question is, what should be the auditor opinion in the auditor repor of the 2013 financial year?
Best regards
ETEusebio – are you doing paper F6 as well as P7?
I’m not sure how this double entry works!
Dr Liabilities $500,000
Dr Retained Earnings $800,000
Cr Assets $1,000,000If all the prior year adjustments have been fully explained and properly accounted for, and on the assumption that the above amounts are material (the company we’re talking about isn’t Royal Dutch Shell or Microsoft is it), and assuming that the auditors are satisfied that the 2013 figures contain no material misstatement and therefore show a true and fair view of the state of affairs as at the year end ……
…… and assuming that the 2012 misstatement was not related to inventory so this year’s cost of sales figure can be relied upon ……
…… then that means that we can also be happy that the PorL fairly reflects the results for the year ……
…… then, if all those assumptions are correct, I think that we can be justified in issuing an unqualified opinion.
We may feel that it is appropriate to include an emphasis of matter to bring the attention of the reader to the prior year adjustments (fully explained within the Notes to the Financial Statements)
Good morning Sir, and many thanks for the quick response.
My apologies. No I’m not doing P7. In this section I’ll seat F6 and F8. Due to that fact, I’ve been reading as much as I could about audit report and as well as his opinion.
I was reading the Audit report for year 2013 of a Bank available in the website and there is a emphasis of matter paragraph, but the auditor did not drawn the attention of the readers to that fact (that they had to restate the FS of 2012), they only make reference to the fact that they changed the auditors.
But in my on opinion, I felt that something was missing in that paragraph.
Sorry about the figures, I did no take into account the double entry when I stated my question.
Best regards
ETWhat did the emphasis of matter paragraph say? And what did the note say to which the auditor made reference in the emphasis of matter paragraph?
Hi Sir,
Translating it from Portuguese to English it says “Without modifying our opinion, we draw attention to the fact that the FS of the bank xyz, related to the financial year 2012, were audited by a previous auditor and he expressed an unmodified opinion on the FS on 23 March 2013”
The situation is full explained within the notes in the FS, but the auditor did not draw attention to that fact (that the FS of 2012 were restated and total asset, liabilities and loss were modified).
Note: The adjustment made in Total Assets is 2,41% of Net Assets.
Best regards
ETHi
Well, that IS interesting. I would have thought that the new auditor would have drawn attention to the changes in the figures and not have drawn attention to the change in auditors.
To do so (draw attention to the change in auditors) gives the impression that the new auditor is not commenting on the corresponding amounts “these are not our responsibility – they were audited by someone else”
I shall not ask you who the new auditors are (nor who the old ones were either)
You can’t remember Eusebio! You’re too young!
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