AUD: Audit Reports: Unqualified Opinion - Issuer - YouTube

All right, scholars, we're now going to take a look at an unqualified opinion for

an issuer. Now, specifically what we want to talk about is, let's identify

once again this unqualified, unmodified, it gets me all confused. So let's

clarify. Unqualified is for public companies. Unmodified is for your

nonissuers, your private companies. How do I remember that? Well, my way of

doing it is unmodified, M. I think of the alphabet L, M, N. M for modified, N

nonpublic. So I remember it that way and then, the qualified L, M, N, O, P, Q. P

for public, Q for qualified, unqualified. It's the best I could do gang. So let's

take a look at an unqualified opinion of an issuer. First of all, we have the

opinion. Notice, it's the very first paragraph. Then we have the basis for

your opinion. Then we have the CAM, the critical audit matters. Let's take a

look at how each of these is done. First of all, notice the title, the Report of

the Independent Registered Public Accounting Firm, and we address it to the

shareholders or board of directors. We don't address it to management. Notice,

in this case, it says, we have audited the accompanying balance sheet of X

Company as of December 31st X2, X1, and the related statements of income,

comprehensive income, stockholder's equity and cash flows for each of the

years that ended and the related notes and schedules collectively referred to as

the financials. Here's our opinion. In our opinion, the financial statements

present fairly in all material respects the financial position of the company at

December 31st, X2 and X1, and the results of its operation cash flows for the year

then ended, in conformity with accounting principles generally accepted in the

United States of America. Not so hard. Nothing there that's too surprising. So

let's go on and take a look at basis for the opinion paragraph. Notice in the

basis, this is where you're going to have RAP MEE, RAP MEE. All right? This is

where you have the financial statements are the R, responsibility of company's

management. Our responsibility is to express an opinion on the company's

financials based on our audit. We are a public accounting firm registered with

the Public Accounting Oversight Board in the United States, known as PCAOB, and

are required to be independent with respect to the company in accordance with

the U.S. federal securities law and applicable rules and regulations of the

SEC and PCAOB. All right. That was it, responsibilities. We conducted our

audit, A, in accordance, A, of the standards of the PCAOB. Those standards

required that we, P, plan and perform, for the other P, the order to obtain

reasonable assurance about whether the financials are free of material

misstatement, whether due to error or fraud. Our audit includes performing

procedures to assess the risk of material misstatement, right? There you have your

Ms of the financials, whether due to error or fraud, and performing procedures

that respond to those risks, such as, in this case, including examining on a test

basis, there's the evidence, there's your two Es. Our audit also included

evaluating the principles used and the estimates made. So you can use those as

your Es as well. You'll notice also, as well as evaluating the overall

presentation of the financial statements, and we believe our audit provides a

reasonable basis for our opinion. The next paragraph is your critical audit

matters. The critical audit matters communicated below are matters arising

from the current period audit of the financials that were communicated or

required to be communicated to the audit committee and that, one, represent

accounts or disclosures that are material to the financial statements and, two,

involve our especially challenging, subjective, and complex judgments. Note

the communication of these critical matters does not alter in any way our

opinion on the financials taken as a whole and we do not, by communicating the

critical audit matters below, provide separate opinion on the critical audit

matters or on the accounts and disclosures to which they relate. Then

you would have whatever they are. Notice we sign it. Note, we also have, we have

served as the auditor since, that's that tenure you have to have. So right here

you have your RAP MEE, RAP MEE. So you have all of your items as we've just

shown you in the previous one and there is my good friend, Sugar Bear, as he's

leading the disco in New York City. One last item is let's take a look at a

comparison between the unmodified L, M, N, for nonissuers, and the qualified,

which is going to be for, you know, L, M, N, O, P, Q. P for public companies, your

issuers. Note here the introductory paragraph; ultimately in the unmodified,

describes the financials. Then you have the responsibility, that's MR DIM, that's

management's responsibility. The auditor's responsibility is to REPORTS

CRAME and then you have the opinion. Notice the opinion is basically the last

paragraph. You sign and you date it. Compare that to the issuer, the public

company, qualified opinion. The opinion is in the first paragraph. Then we have

the RAP MEE, RAP MEE. All right. We have that one there that we'll use for

the basis for the opinion. We then have your critical audit matters and then

finally we sign it and of course, you also have the auditor's tenure, which has

to be included in there as well. So that's a great summary of the distinction

where you have the privately held companies; nonissuers, opinion at the

bottom; while compared to the public issuers, the opinion in the front end. A

lot of little differences. Hopefully that summary gives you a great insight

and will be something you'll remember when you see those questions on your CPA Exam.