(3) Standard audit report
When an unqualified audit report issued by a certified public accountant does not attach an explanatory paragraph, an emphasis of matter paragraph or any qualifying words, the report is called Standard audit report.
The standard audit report contains complete elements of the audit report, is an unqualified opinion, and does not include explanatory paragraphs, emphasis paragraphs or any qualifying terms. Otherwise, it cannot be called a standard audit report.
1. The emphasis of matters paragraph of the audit report
(1) The meaning of the emphasis of matters paragraph
The emphasis of matters paragraph of the audit report refers to the CPA’s statement in the audit opinion A paragraph added after a paragraph to emphasize important matters.
The emphasized matters should meet the following conditions at the same time:
(1) It may have a significant impact on the financial statements, but the audited unit has carried out appropriate accounting treatment and made a statement in the financial statements. Full disclosure;
(2) It does not affect the audit opinion issued by the certified public accountant.
From an auditing theory perspective, CPAs add an explanatory paragraph before the audit opinion paragraph to explain the reasons for issuing qualified opinions, negative opinions and disclaimers of opinions; and add an emphasis on matters paragraph after the opinion paragraph, It only increases the information content of the audit report and improves the usefulness of the audit report, but does not affect the audit opinion issued. If an emphasis of matter paragraph is used instead of an audit opinion, it will lead to confusion in the type of audit report.
(2) Situation of adding emphasis paragraphs
1. Raising significant doubts about the ability to continue as a going concern
When there are events or circumstances that may cause significant doubts about the ability to continue as a going concern but do not affect the issued audit opinion, the CPA should add emphasis after the audit opinion paragraph The matter paragraph emphasizes this.
When CPAs emphasize matters to increase the ability of the audited entity to continue operating, they should comply with the relevant requirements of the "Audit Standards for Chinese Certified Public Accountants No. 1324 - Going Concern". Articles 31 and 32 of the Standards stipulate that if it is believed that it is appropriate for the audited entity to use the going concern assumption when preparing financial statements, but there are significant inaccuracies in matters or circumstances that may cause significant doubts about its ability to continue as a going concern. Certainty, the CPA should consider:
(1) Whether the financial statements have fully described the main events or circumstances that cause significant doubts about the ability to continue as a going concern, and management’s response plans for these events or circumstances ;
(2) Whether the financial statements have clearly indicated that there are significant uncertainties in matters or circumstances that may cause significant doubts about the ability to continue operating, and the audited unit may not be able to realize assets in the normal course of business. Pay off debt.
If the financial statements have been fully disclosed, the certified public accountant shall issue an unqualified audit report and add an emphasis of matters paragraph after the audit opinion paragraph to emphasize matters that may cause significant doubts about the ability to continue as a going concern or The fact that there are significant uncertainties in the situation, and users of financial statements are reminded to pay attention to the disclosure of relevant matters in the notes to the financial statements.
(2) Significant uncertain events
When there are uncertain events that may have a significant impact on the financial statements (except for going concern issues), but do not affect the published audit opinion , the CPA should consider adding an emphasis of matter paragraph after the audit opinion paragraph to emphasize this.
Uncertain matters refer to matters whose results depend on future actions or events and are not directly controlled by the audited entity, but which may affect the financial statements.
When understanding uncertain events, CPAs should grasp the following characteristics:
(1) The results of uncertain events depend on future actions or events.
(2) Uncertain matters are not under the direct control of the audited entity. On the date when the management approves the financial statements, it is impossible to obtain more information to eliminate the uncertain matters.
(3) Uncertain matters may affect the financial statements, and the impact is not far away and can be expected to be resolved in the future.
For example, the audited unit has been sued by other units, accusing it of infringing patent rights and requiring it to stop the infringement and compensate for the losses caused. The court has accepted the case but has not yet heard the case. The litigation matter is an uncertain matter. Because the outcome of litigation matters depends on the court's judgment or the actions taken by the plaintiff, it is not directly controlled by the audited unit, nor is it subject to the will of the audited unit. However, once the litigation matter is heard and decided by the court, it may cause losses to the audited unit.
(3) Other auditing standards stipulate the addition of a paragraph for emphasis of matters
Except for the above two situations and the circumstances stipulated in other auditing standards for the addition of a paragraph for emphasis of matter, the CPA should not Add an emphasis of matter paragraph or any explanatory paragraph after the audit opinion paragraph in the audit report to avoid misunderstandings by users of financial statements.
Other auditing standards that add emphasis of matter paragraphs include:
Article 35, Paragraph 2, of "Chinese Certified Public Accountants Auditing Standards No. 1324 - Going Concern" stipulates that if If it is believed that the other preparation basis selected by management is appropriate and the financial statements have been fully disclosed, the CPA may issue an unqualified audit report and consider adding an emphasis of matter paragraph after the audit opinion paragraph to remind users of financial statements to pay attention to management Other organizational bases for layer selection.
Article 17 of "Chinese Certified Public Accountants Auditing Standards No. 1332 - Subsequent Events" stipulates that if management modifies the financial statements, the CPA shall implement necessary audit procedures based on the specific circumstances and review the management Whether the measures taken by the management can ensure that all persons who received the original financial statements and audit reports understand this situation and issue a new audit report on the revised financial statements. Article 18 stipulates that the new audit report should add an emphasis of matter paragraph to draw the attention of users of financial statements to the detailed explanation of the reasons for modifying the original financial statements in the notes to the financial statements, as well as the original audit report issued by the certified public accountant.
Article 10 of "Audit Standards for Chinese Certified Public Accountants No. 1511 - Comparative Data" stipulates that when the audit report previously issued on the financial statements of the previous period is an audit report with an unqualified opinion, if it results in a non-unqualified opinion, Although the matters with qualified opinions have been resolved, they are still important to the current period. The CPA may add an emphasis of matter paragraph to the audit report to mention this situation.
In addition, Article 11 of the "Audit Standards for Chinese Certified Public Accountants No. 1511 - Comparative Data" stipulates that when auditing the financial statements of the current period, the CPA may notice significant changes that affected the financial statements of the previous period. misstatement, and no audit report with an unqualified opinion has been issued on the material misstatement. If the financial statements of the previous period have not been corrected and an audit report has not been reissued, but the comparative data have been appropriately restated and fully disclosed in the financial statements, the CPA may add an emphasis of matter paragraph to the audit report to explain this situation.
Article 13, paragraph 1, of "Audit Standards for Chinese Certified Public Accountants No. 1521 - Other Information in Documents Containing Audited Financial Statements" stipulates that if other information needs to be modified but the audited unit refuses to do so, , the CPA should consider adding an emphasis of matter paragraph to the audit report to explain the major inconsistency, or take other measures.
Since the emphasis of matters paragraph is added to remind users of financial statements to pay attention to certain matters, it does not affect the CPA's audit opinion. In order to make this point clear to users of financial statements, the CPA should add the emphasis of matters paragraph in the emphasis of matters paragraph. It is specified in that this paragraph is only used to remind users of financial statements to pay attention and does not affect the audit opinion that has been issued.