Section 4: 10–20%A15

Audit Reports

Exam insight

Audit reports are the single most-tested topic on the AUD exam, showing up in an estimated 15-20% of all questions. Adverse opinions and disclaimers are what people confuse most. Keep it simple: adverse is for misstatements (the auditor knows the statements are wrong), and disclaimer is for scope limitations (the auditor cannot know). A detail most candidates miss: under AU-C 705, the 'except for' phrase sits in the opinion section and points to the 'Basis for Qualified Opinion' section, which 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, while AU-C 701 requires Key Audit Matters (KAM) only when the auditor is engaged to report them (issuers get Critical Audit Matters under PCAOB as 3101 instead).

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

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Opinion MatrixCause times pervasiveness picks the opinion: misstatement or scope, material or pervasive.The Extra ParagraphEmphasis-of-matter, other-matter, and key audit matters each have a distinct job, and none changes the opinion.Estimates, Going Concern, Related PartiesTest estimates for bias, evaluate management's going-concern plans, and disclose related parties.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.