This chapter explained the different types of reports that auditors issue to indicate the character of their audit and the degree of responsibility they are taking. To summarize:

• The auditors' report should be viewed as a very carefully structured technical communication. The auditors' standard unqualified report includes an introductory paragraph, clarifying the responsibilities of management and the auditors; a scope paragraph, describing the nature of the audit; and an opinion paragraph, summarizing the auditors' opinion based on the audit. The report has a title that includes the word independent, is addressed to the company whose financial statements are being audited or to its board of directors or stockholders, and is signed with the name of the CPA firm.

• The auditors' options when expressing an opinion are a standard unqualified opinion, an unqualified opinion with explanatory language, a qualified opinion, an adverse opinion, and a disclaimer of opinion. Figure 17.2 provides details on the appropriate modifications required for each of these types of reports.

• When a client presents comparative financial statements for one or more prior periods with the current-period financial statements, the auditors should make certain that all periods are covered by an audit report. Audit reports on prior periods should be updated based on any new information that might affect the auditors' opinion. When predecessor auditors have audited the prior-period financial statements, the current auditors may summarize the predecessor auditors' opinion in the current-year audit report, or the client may arrange to have the predecessor auditors reissue their audit report.

• Auditors of publicly held corporations must understand the various reporting requirements of the SEC. The reports filed with the SEC must be in accordance with Regulation S-X, which governs the form and content of the corporation's financial statements.

Describe the standard audit report for nonpublic entity audits.

Describe the standard audit report for public company audits.

Identify the circumstances that result in the addition of explanatory language to the auditors' standard report, and describe the resulting report modification.

Identify the circumstances that may result in qualified opinions, adverse opinions, and disclaimers of opinion, and describe the resulting report modification.

Describe the auditors' responsibilities for reporting on comparative financial statements.