 Hello and welcome to this session. This is Professor Farhad in which we would look at the report or audit opinion on the internal control over financial reporting. Well this is going to take us back to the audit report that we looked at when we looked at the PCAOB public entity audit opinion and if you remember and if not that's fine under the auditor's opinion we stated that we audited the financial statements and we also stated that we audited the internal control and we said we're going to talk we're going to assure report for the internal control. Notice here we have audited in accordance with the standard of the PCAOB the internal control over financial reporting and we used COSO as the criteria. What we're going to do in this session we are going to go over this report the report on internal the report on internal control over financial reporting. So this is the complete report you cannot see it properly just like what I did with the other two reports the PCAOB as well as the AICPA standard unqualified and modified report I'm going to go over each section of this report separately. So let's go ahead and get started the first thing is the report title. Notice the report says independent registered public accounting firm we have to emphasize the fact that we are independent and that's a given why because when we conducted the financial statement audit we also stated that we are independent and remember when we audit the financial statement we're also auditing the internal report so if we are independent for the financial statements we must be independent for the internal report it's basically giving but nevertheless I'm going to have to emphasize it. Also who do we address the report to same thing with the financial statement we address it to the board of directors and the stockholders of Adams company not to management why because we don't work for management we work for the shareholders we are independent from management because management prepared the financial statement management in control of the internal control design and implemented the internal control we don't deal with them we don't report to them because we are independent. Now let's go to the auditor's opinion what is auditor's opinion this is the opinion over the financial reporting we're going to state clearly that we have audited notice the internal control over financial reporting of Adams company giving the date based on the criteria established by COSO the committee of sponsoring organization in our opinion the company maintained an all-material respect effective internal control over financial reporting as of this date this is our opinion they maintain an effective internal control in our opinion based on the criteria that we use remember we need the criteria and that criteria is the COSO criteria so don't worry later on we're gonna have one whole chapter about internal control we will discuss everything about internal control also we're gonna have a cross-reference paragraph what is this cross-reference paragraph if you remember here we cross-reference the internal control report in this report we're gonna cross-reference the financial statement report we're gonna also state that we have audited and according with the with the PCAOB the consolidated financial statement so basically what we're saying here is we also audited the financial statement and we have an unqualified opinion now we need to talk a little bit more about how did we come up with this basis of opinion how did we come up with our opinion that the internal control is effective now before we look we look any further i would like to make a public announcement about my company forehead accounting lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses my CPA material is aligned with your CPA review course such as becker roger wiley gleam miles my accounting courses are aligned with your accounting courses broken down by chapter and topics my resources consist of lectures multiple choice questions true false questions as well as exercises go ahead start your free trial today no obligation no credit card required basis for opinion well here we go we we start by saying and this is important and we did this one with the financial statement we want to remind the users that management is responsible for maintaining effective internal control not us what do we do well our responsibility is to express an opinion so management is responsible for the internal control our responsibility is express an opinion on the company's internal control over financial reporting again we state again for the third time in the report that we are we are a public accounting firm registered with the pca ob united states and are required to be again independent with respect of the companies in according with the us federal securities law applicable rules and regulation and of course the sec and the pca ob so we are independent and all with all these organizations in terms of the rules that they bought all we conducted our audits and according with the when according with the standards of the pca ob those standards require that we plan and plan and perform the audit to obtain reasonable assurance not guaranteed not absolute whether those effective internal control was maintained in all material respect our audit including included what did it include what did we do we include an understanding of internal control how do internal control work again when we talk about internal control we're going to learn how the auditor learn about the internal control of the company we assess the risk that a material in the statement exists we tested and evaluated the design and the operating effectiveness remember what we did is we tested and evaluated we did not set up those design the management set up the design because if we set up the design we cannot test our own work and we perform and performing such other procedures as we consider necessary under the circumstances we believe that our audit provide a reasonable basis for our opinion so basically we are stating how did we conducted the audit to come up with our opinion then in the report we we are going to have a paragraph basically defining internal control basically a boiler plate simply put financial accounting one-on-one you would learn about what is internal control and this is the definition of internal control and we're going to have a paragraph about the limitation of internal control a company's internal control over financial reporting is a process to design to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of the financial statement for external purposes in accordance with gap a company's internal control over financial reporting include these policies and procedures again here to just tell us what is internal control pertaining to the maintenance of record so we have to make sure we have a good record good record keeping system provide reasonable assurance that transaction are recorded as necessary to permit preparation of financial statement provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company's asset basically a boiler plate definition of what an internal control is again if you don't that we don't have to know it now but go to the internal control chapter and you would learn specifically about every single statement of those how do we do so also we have to mention inherent limitation what are limitation things that defeat the internal control things that don't let us achieve our financial objective our financial reporting objective because of its inherent limitation internal control may not prevent or detect misstatement it has a limitation also projection of any evaluation of the effectiveness of future period are subject to the risk that control may become inadequate because of changes in conditions and here's what we're saying specifically let's be clear we cannot tell you anything about the future because in the future many things could change many things could change the company's financial position the economic situation the people that work for the company as a result we cannot make a statement about the effectiveness of the future internal control or that the degree of compliance with policies and procedures we can say it may deteriorate we don't know so all we're telling you is what we're telling you now we cannot say anything about the future simply put our report is as of a particular specific date what should you do now what should you do you should go to far hat lectures and work mcqs true false that's going to help you understand this concept better good luck study hard stay safe and invest in yourself