Audit Reports
Audit reports are THE single most-tested topic on the AUD exam, appearing in an estimated 15-20% of all questions. The #1 AICPA trap is getting candidates to confuse adverse opinions with disclaimers — remember, adverse is for misstatements (the auditor KNOWS the statements are wrong) and disclaimer is for scope limitations (the auditor CANNOT KNOW). A critical detail most candidates miss: under AU-C 705, the 'except for' phrase lives in the OPINION section and points to the 'Basis for Qualified Opinion' section that describes the matter. Also know that AU-C 706 requires emphasis-of-matter paragraphs to use the heading 'Emphasis of Matter' and reference the specific note disclosure, while AU-C 701 requires Key Audit Matters (KAM) only when the auditor is ENGAGED to communicate them (issuers get Critical Audit Matters under PCAOB AS 3101 instead).
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What AICPA Wants You to Know
- 1Identify the four types of audit opinions
- 2Determine the appropriate opinion for given circumstances
- 3Understand the structure and required elements of the audit report
- 4Distinguish between emphasis-of-matter and other-matter paragraphs
- 5Apply the concept of pervasiveness in selecting opinion type