Question

The PCAOBs recently revised auditor reporting standard includes a requirement for he auditor to communicate ortical udt matters. Crical audit maters include those matters during the audit that involved diffcult, subjective, or complex auditor judgments or that posed dfoulty to the auditor in obtaining sufcient appropriate evidence or in foming the opinion on the financial statements Similarly, the Intemational Auditing and Assurance Standards Board (AAS) recently revised the auditor's report in the ISAS to require auditors to communicate key audit matters. Key audit matters include communication of similar kinds of Information as noted by the PCAOB uch as areas of higher assessed risk of material misstatement and the effects of significant events or transactions that occumed during the period. Read the mouirements Requirement a. Desorbe how users of the francial statements may beneft from communications about these maters in an udt report. Users may find the dsdonures by the audtor about oritical audit matters helph in understanding Matters that wouA be disclosed provide users inights about the he auditor in obtaining suffcient aporopriate evidence for forming an opinion. Requirement b. Desorbe how communicion of Pese matters may not be benefcial to users of the financie statements Auditing financial statements is a Most investorn tailar with he detals of the audit process and they be able to epropriately evaluate many of the es daciosed and how the audtor reached his or her conclusions about the impect of hone tems on the francia statements and the audit process. Disciosure of ortcal udmaters about the nature of the auditors opinion provided in the audit report Opponents also believe disdiosure of such matters should come Requirement e. What dfoutes, if any, may auditors face in communicating about these matters? The chalenge for auditors when making disciosure of critical audit matters wil be Because most audits involve which may not improve communications to users of the financial statements. Disciosure of these matters

Answer 1

The following are the correct options for the multiple choice questions given above:

Requirement a.

1 Option 1 - some of the challenges and issues that arose during the audit.

2 Option 1 - most difficult, subjective, or complex auditor judgements or issues that posed the most difficulty to

Requirement b.

1 Option 1 - complex process that requires the knowledge, experience, and judgement of professional auditors.

2 Option 2 - are not

3 Option 1 - may not

4 Option 1 - may create unnecessary confusion

5 Option 3 - from management rather than the auditor.

Requirement c.

1 Option 1 - determining which items should be communicated and the nature and extent of that communication.

2 Option 1 - complex issues, the need to include such disclosures will likely lengthen the auditor's report substantially,

3 Option 2 - may increase second-guessing of the audit process, leading to increased audit costs and unwarranted auditor litigation.