An Introduction to Assurance and Financial Statement Auditing 23

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Other types of reports are available to the auditor as well, depending on the circum- stances. For example, if the auditor is unable to obtain all the necessary information to con- clude whether the inventory account is fairly stated (which is called a “scope limitation”), the auditor will qualify the report, indicating that the financial statements are fairly stated except for the fact that the auditor was unable to obtain sufficient appropriate evidence about the inventory account. If the scope limitation is so pervasive that it limits the ability of the auditor to conclude on the financial statements as a whole (e.g., the client’s financial records were all destroyed in a fire), the auditor will issue a “disclaimer of opinion,” indicating that it is not possible to express an opinion on the fairness of the financial statements.

While it is important for you to be familiar with the basic components of the audit report as part of understanding an overview of the audit process, we cover the different types of financial statement audit reports in detail in Chapter 18. Our experience is that while it is helpful to get an idea of what an audit report looks like early on, students find it more intui- tive to learn the fundamental concepts of auditing and how an audit is conducted before being immersed in the details of audit reporting.

The audit report represents the culmination of the audit process and is the way the auditor communicates his or her opinion about a client’s financial statements with outside parties. An example of an unqualified audit report is included in this chapter to give you a basic idea of what the most common type of audit report for a public company looks like and how auditors report their opinion to the public. Be aware that changes are coming for audit reporting—the biggest change perhaps being that the auditor will communicate “critical audit matters” in the audit report. Critical audit matters are those that involve difficult, subjective, or complex auditor judgments or pose significant difficulty to the auditor in completing the audit. We’ll discuss these coming changes further in Chapter 18.