unqualified opinion with explanatory paragraph

Unmodified opinion is the opinion where auditor expresses an opinion that financial statements are presented, in all material respects, in accordance with applicable financial reporting framework. CAMs are not a substitute for explanatory paragraphs that are required under AS 3101. The COVID-19 pandemic and the related market conditions create many new uncertainties for auditors, audit committees, investors and management of public companies. Unqualified opinion An auditor includes a separate paragraph in an otherwise unmodified financial statement audit report to emphasize that the entity being reported upon had significant transactions with related parties. Explanatory Language Added to the Auditor's Report.18 Other standards of the PCAOB require that, in certain circumstances, the auditor include explanatory language (or an explanatory paragraph) in the auditor's report, while not affecting the auditor's opinion on the financial statements. These circumstances include when: PCAOB Auditing Standard 2710, .04 The auditor’s responsibility with respect to information in a document does not extend beyond the financial information identified in his report, and the auditor has no obligation to perform any procedures to corroborate other information contained in a document. By continuing to browse this site, you agree to this use of cookies in accordance with our

Before this amendment, the auditor was required to include an explanatory paragraph in an unqualified opinion in certain instances involving uncertainties. Certain issuers also are required by the SEC to have an audit of their Internal Controls over Financial Reporting (ICFR) and in such cases the auditor may choose to issue a combined audit report that includes both the auditor’s opinion on the financial statements and the ICFR opinion, or issue separate opinions for each audit..02 The auditor is in a position to express an unqualified opinion on the financial statements when the auditor conducted an audit in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and concludes that the financial statements, taken as a whole, are presented fairly, in all material respects, in conformity with the applicable financial reporting framework.While not affecting the auditor’s opinion on the financial statements, there are certain circumstances in which the PCAOB auditing standards require the auditor to include explanatory language (or an explanatory paragraph) in the auditor’s report.
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Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs 1165 Including an Emphasis-of-Matter Paragraph in the Auditor’s Report (Ref: par.

B) materiality, scope and report.

CAMS are not required to be included in the auditor’s report when the auditor expresses an adverse opinion or disclaims an opinion.While COVID-19 in and of itself, or going concern uncertainty, would not necessarily meet the definition of a CAM, the pandemic could increase the subjectivity and complexity of a specific audit area such that it meets the definition of a CAM, when it otherwise may not have prior to the pandemic. As SEC Chair Jay Clayton recently recognized, the continuing operation of the US capital markets is an essential component of our national response to, and recovery from, COVID-19. A standard unqualified audit report consists of a report title, audit report address, introductory paragraph, scope paragraph, opinion paragraph, name of CPA firm and audit report date. An unqualified report for a private company follows a standard format with three paragraphs: introduction, scope, and opinion. AS 3101.A1 defines a CAM as any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. Auditors issue an unqualified report after they gather sufficient competent evidence and conduct the audit according to generally accepted auditing standards (GAAS) using financial statements that the client prepares using GAAP. 79 eliminates the requirement for an explanatory paragraph in such circumstances. COVID-19 continues to impact public company financial statements in different ways and at differing levels of severity depending on an entity’s capitalization, geographic location and the industry in which the entity operates, among other factors.
An unmodified opinion audit report with an explanatory paragraph or modified wording is the same as a standard unmodified opinion report except that the auditor believes it is necessary to provide additional information about the audit or the financial statements. There is a lack of sufficient appropriate evidential matter or there are restrictions on the scope of the audit that have led the auditor to conclude that he or she cannot express an unqualified opinion and he or she has concluded not to disclaim an opinion.b. 58 lays out these other basic elements of an unqualified report:If you identify a subsequent event that requires disclosure, your audit firm will consider dual-dating the report. SAS No. Introduction: This paragraph indicates what financial statements you audited and includes a statement that the financial statements are the responsibility of management. ... a reference to a prior period adjustment in the opinion paragraph.

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