 Hello and welcome to the session, this is Professor Farhad and this session we will look at the conditions for the standard unmodified opinion. Unmodified opinion means we are using the AI CPA report. This topic is covered in an auditing and attestation course and obviously it's covered on the CPA auditing exam. As always I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1600 plus accounting, auditing, finance and tax lectures. This is a list of all the courses that I cover. Please connect with me on Instagram. On my website you will find additional resources such as PowerPoint slides through false multiple choice if you're studying for your CPA exam 1200 plus CPA questions and quasi CPA simulations. So I strongly suggest you visit my website if you want to supplement your studies. The first thing we're going to look at, we're going to look at the actual report that I went through in the prior session. So in the prior session I looked at this report and I showed you the eight component, the report title, the audit report, address, audits opinion, basis for the opinion, management responsibility, auditors responsibility, the signature and the audit report date. So I went through and I showed you what goes into each report but I did not talk about why we said this report present fairly. In other words I did not tell you what conditions will have to exist for this opinion to be unmodified. Now what is unmodified opinion? Unmodified opinion it means clean opinion. It's a good opinion although it sounds unmodified or something wrong but nothing really wrong. That's a clean opinion and that's the most common opinion. So most of the audit reports are clean opinion. Why? Because if it's not a clean opinion the customer, the customer means the client will get into trouble. They may get into trouble with their lenders, they may get trouble with the investors because you want to comply. If the report, if the audit is not clean, if I cannot give them an unmodified opinion generally speaking the client will do, will comply and will have to correct, take corrective actions. Now I said most opinions are clean opinion, unmodified opinion. It means there are small percentage that are not unmodified opinion and we're going to have to talk about those under what circumstances we have to issue those. But to issue a clean opinion or unmodified opinion the following four conditions have been met. They have been met. So we have to meet all those four conditions. One, all statements balance sheet, income statement, statements of changes in stockholders' equity and the statement of cash flow as well as required disclosure are included in the financial statements. So we are showing you all the financial statements plus the required disclosure. That's the first condition. The second condition is we collected enough evidence, sufficient appropriate evidence, sufficient appropriate evidence that the audit and the auditor has conducted the engagement in a manner that enable him or her to conclude that the audit was performed in accordance with the applicable auditing standard. For example, in the report that we saw in the prior session we use gas. So we followed certain auditing standard. So I'm going to assume we use gas here because we're looking at the AICPA standard. Now sometime even under the AICPA sometime you have to follow the international standard or the PCAOB if the bank want you to do so but generally speaking if it's an AICPA report unmodified opinion we follow gas. Also the financial statements are fairly presented in all material respect in accordance with U.S. Generally Accepted Principle. Also we followed U.S. gap. Here again we're talking about the AICPA or if there's any other appropriate framework sometime again they want us to follow IFRS because the bank want you to follow IFRS then that's fine you have to follow both gap and IFRS. Also this means you have adequate disclosure it's not only you follow gap you have adequate disclosure either as part of the financial statements or part of the notes. And last but not least there's no circumstances requiring the addition of an emphasis of a matter paragraph. Now what is the emphasis of a matter paragraph? Well you may want to raise attention or you want the users of the report to pay attention to asserting item. You will add something called emphasis of a matter paragraph which we'll look at those later on. Or modification of wording of the auditor's opinion in the report. If there's any reason you need to do so then it's no longer unqualified opinion. So standard unqualified opinion will have to meet those four conditions. What happened if we don't meet those four conditions? What other options do we have? First if it's standard unmodified opinion that's the cleanest the four condition have been met. Well what happened if we if we assure report and we have to use an emphasis of a matter explanatory paragraph on non or non standard wording. When do we use this? Well a complete audit took place with satisfactory result and the financial statements are fairly presented so far so good but the auditor believe that it's important or is required to provide additional information. But the auditor thinks we should kind of tell you about this thing okay whatever that thing is we'll talk about we'll have a separate session to talk about this type of report. Also sometime we might issue a qualified report again those reports qualified report it's not as common but it does exist. Well here the auditor conclude that the overall financial statements are fairly presented but the scope of the audit has been materially restricted or the applicable accounting standard were not followed in preparing financial statements. What are we saying here it means overall it's fairly presented but inserting account we did not follow the appropriate accounting standard or we could not collect enough information about an account and we'll mention that information. Again we'll have a separate recording about qualified opinion under what circumstances we issue a qualified opinion. Then we have the adverse and this is that you decline don't want to have the adverse that's the worst. The auditor conclude that the financial statements are not fairly presented so notice and the other ones they were fairly presented. But they did not follow certain gap procedure gap standard fairly presented but we needed to emphasize a matter now they're not fairly presented and this is an issue. And we need to talk about why under what circumstances they're not fairly presented and disclaimer basically the auditor is unable to form an opinion as to whether the financial statements are fairly presented we can't we simply we don't have enough information. We can't we can do so or the other common thing you disclaim is you are not independent and and we talk about that later on disclaimer it's basically I'm not independent because part of the audit report is your credibility as an independent auditor. Because when someone is looking at the report and they believe you're not independent the report would lose its credibility. Therefore, once you lose your independence you have to get out you disclaim nothing wrong just I am not independent. I'm not qualified to issue an opinion. So again we'll talk about those later on. In the next session we would look at the standard audit report under PC a OB and the priors and in this session look at the AI CPA in the prior session sorry we look at the AI CPA. The PC a OB we're dealing with public companies, or they, they call them for the CPA exam issuer. Okay public companies, like what do we mean by public companies companies like Apple computers Microsoft Pepsi co those are public companies. They follow the friend standard they follow the PC a OB standard are called issuers. Okay. Once again, if you like this recording please like it share it put it in playlist and don't forget to visit my website for additional resources and lecture especially if you're studying for your CPA exam. You will do so once in your lifetime it's a lifetime investment. Make sure you make the proper investment study hard accounting is worth it.