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Monday, March 25, 2013

Clarity Project Example - Audit Report Sample Inside!

At Roger CPA Review, we are not only committed to helping our students successfully pass the CPA Exam, but also to ensuring that all CPA Candidates are educated on all exam-related industry updates. We've done our best to deliver updates & information relating to the Audit Clarity Project changes through our blog and special webcast presentation, and now we're taking it a step further. 

You asked, and we listened! Without further ado, here is a summary of the Project Clarity changes that will take effect on July 1, 2013, and a sample Audit Report with the new standards - straight from our course. Enjoy!

2013 Audit Clarity Project Summary of Changes due on CPA Exam 7/1/2013

  1. Almost every standard has been re-written in the clarity format, making this the most comprehensive change to auditing standards in decade
  2. The clarity standards add several new requirements that auditors will have to meet in order to comply with generally accepted auditing standards
  3.  The clarity standards introduce new terminology that will be important for candidates to learn
  4. The clarity standards make significant changes to audit reports

  • Unmodified report (old name was unqualified report) for Non-public companies/non-issuers. Now 4 paragraphs – see below.
  • Report for Public companies (issuers) is similar to old Audit report – (3 paragraphs)
  • Extra paragraphs are now called Emphasis-of-Matter and Other Matter paragraphs (previously called explanatory paragraphs).
  • Division of Responsibility now called Group Financial Statements.
  • Qualified opinions now called Modified opinions (Qualified except for, Disclaimer and Adverse).

Independent Auditor’s Report

To the Board of Directors and Stockholders of ABC Company


We have audited the accompanying consolidated financial statements of ABC Company and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 20X1 and 20X0, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the finan­cial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in ac­cordance with accounting principles generally accepted in the United States of America; this includes the design, im­plementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated fi­nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We con­ducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consoli­dated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reason­ableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the fi­nancial position of ABC Company and its subsidiaries as of December 31, 20X1 and 20X0, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Roger and Co., LLP
San Francisco, California
February 7, 20X2

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