Basic elements of the unqualified audit report.

(a) Basic elements of the unqualified audit report.

Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).

1. Title
Audit reports should be addressed to the members of the company on whose behalf the audit is undertaken.

2. Introductory paragraph
It identifies the financial statements audited to distinguish such information from other documents that have not been subject to audit e.g. chairman’s report.
This paragraph also refers to the accounting convention under which the financial statements have been prepared.

3. Statement of responsibility of directors and auditors. This states that it is the responsibility of the directors to prepare financial statements that show a true and fair view.

4. Basis of opinion (scope paragraph)
Audit carried out in accordance with IAS, ISA and Company’s Act requirement and other statutory requirements.

5. A statement that the audit was planned and performed to obtain reasonable assurance that financial statements are free from material misstatements.

6. It should describe an audit as including:

a. Examining on a test basis evidence to support the financial statement amounts and disclosures.
b. Assessing the accounting policies used in preparing the financial statements
c. Assessing the significant estimates made by directors in preparation of financial statements.
d. Evaluating the overall financial statement presentation.

7. It should clearly state the auditor’s opinion as to whether the financial statements give a true and fair view in accordance with financial reporting framework and their compliance with statutory requirements. In particular whether the balance sheet and the profit and loss account show a true and fair view of the state of the financial position of the company and its financial performance.

8. It should date the report as of audit completion date i.e. when the auditor receives all evidence required to support his opinion.

9. It should be signed in the audit firm’s name and should name the audit firm office.

b) The ISA attempt to ensure that the report of the auditors is clearly understood by giving guidelines to auditors as to how the report should be constructed and what details it

Issue

Any of a company's securities or the act of distributing the securities. Issued shares refer to the portion of a company's shares that have been issued for sale. A company does not have to issue the total number of its authorized shares.

Investment Fund

A closed-end fund that offers investors the ability to buy a security that represents a portfolio of investments with a specific investment strategy. These products use funds raised through a public offering to invest in a portfolio of securities, which are activelymanaged to create income streams for investors, typically through a combination of dividends, capital gains, interest payments, and in some cases, income from derivative investment strategies. These funds are not directly related to an operating business. Some examples are: funds of income funds, senior loan funds, mortgage-backed security funds, and commodity funds.

Investment Dealer

Securities firms that employ investment advisors to work with retail and institutional clients. Investment dealers have underwriting, trading and research departments.

Investment Counsellor

A specialist in the investment industry paid byfee to provide advice and research to investors with large accounts.

Investment Capital

Initial investment capital necessary for starting a business. Investment capital usually consists of inventory,equipment, pre-opening expenses and leaseholds.

Investment Advisor

A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products.

Issue Status

The trading status of a class or series of an issuer's listed securities, such that a class or series of listed securities of an issuer may be halted, suspended, or delisted fromtrading.

Issue Status

The trading status of a class or series of an issuer's listed securities, such that a class or series of listed securities of an issuer may be halted, suspended, or delisted fromtrading.

Issued and Outstanding Securities

Commonly refers to the situation where the number of issued securities equals the number of outstanding securities. However, under certain corporate statutes in Canada, an issuer may have issued securities and then repurchased those securitieswithout cancelling them. In that case, the securities are issued but are not outstanding. As a result, the number of issued securities does not equal the number of outstanding securities.

Jitney Order

The execution and clearing of orders by one member ofa stock exchange for the account of another member.For example, investment dealer A is a small firm whose volume of business isnot sufficient to maintain a trader on the exchange. Instead, investment dealer A gives its orders to investment dealer B, a larger organization which is a member of the exchange, for execution. Investment dealer A pays a reduced percentage of the normal commission.

Liabilities

The debts and obligations ofa company or an individual. Current liabilities are debts due and payable within oneyear. Long-term liabilities are those payable after one year. Liabilities are found ona company's balance sheet or an individual's net worth statement.

Limit Order

An order to buy or sell stock at a specified price. The order can be executed only at the specified price orbetter. A limit order sets themaximum price the client is willing to pay as a buyer, and the minimum price theyare willing to accept as a seller.

Liquidating Order

An order to close out an existing open futures or options contract. A liquidating order involves the sale of a contract that has been purchased or purchase of a contract that has been sold.

Liquidity

This refers to how easily securities can be bought or sold in the market. A security is liquid when thereare enough units outstanding for large transactions to occur withouta substantial change in price.

Index

A statistical measure of the state of the stock market, based on the performance of stocks. Examples are the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index.

Income Trust

Also called income funds. Income trusts are trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis,from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generatingbusinesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share.
There are four categories of income trusts: business trusts; real estate investmenttrusts (REITs); energy trusts; and power, pipeline, and utility trusts.

Income Deposit Security (IDS)

An exchange-traded, fixed income-like instrument consisting of a subordinateddebt security and a share of common stock packaged together to form a tax-efficient delivery mechanism to distribute an issuer's free cash flow to its investors. Investors are paid dividends from the commonshare component and interest from the subordinated debt. The structure was created for U.S.-based companies to replicate the economic attributes of the Canadian income trust structure - providing steady, high-yield returns to U.S. and Canadian investors in U.S. companies. IDSs do not use the trust structure. Also known as income participating securities (IPS).

Improving the Market

An order that either raises the bid price or lowers the offering price is said to be improving the market. The market improves because the spread between the bidand offer decreases.

If, As & When Issued Trading

Occurs when new securities are posted for trading, and trading takes place before the closing (formal original issuance) of the prospectus. Also known as the "grey market". The term is used only for listing of new securities, either on a listing of a new issuer, a supplemental listing, or an additional listing of existing listed securities. Settlement occurs on the closing of the prospectus. The time from posting for trading to closing is generally within a week.