 and welcome to the session in which we will discuss the integrated audit and specifically we are wrapping this up and forming the opinion. Now what is an integrated audit? It's the auditing the financial statement plus the internal control over financial reporting at the same time and is showing an opinion about the financial statements as well as the internal control over financial reporting. The auditor's objective again an integrated audit is to express that opinion. Well how do we express the opinion? We have to we have some work to do. We have to plan the engagement, use the top-down approach, test and evaluate the design, test and evaluate the operating effectiveness of the internal control over financial reporting. Then we could be engaged in two type of reports. Non-issuer and issuer. In the prior session we looked at non-issuer report. In this session we would look at the issuer. Issuer is the PCAOB. Now PCAOB companies they always will need to have an integrated audit simply put they have to audit their financial statements plus internal control over financial reporting. For non-issuer remember it's optional it's whatever the company needs it or not. Also in the prior session we talked about what is a controlled efficiency, significant efficiency and material deficiency and we discuss who do we report those deficiencies to. For controlled efficiencies significant deficiencies and material deficiencies we would always inform management in writing as well as the audit committee. For significant and material deficiency we would inform the people in charge of governance and since it's a PCAOB we would assume it's the audit committee in writing. So when do we have to inform those groups prior to showing the report on internal control? Now we're gonna look at the report and this report is published to the outsiders because this is a PCAOB audit. Just like with non-issuer we're gonna have either a separate report or a combined report or a combined report simply put we might have two reports. One report could be separately for internal control over financial reporting and one report that talks about internal control over financial reporting plus the audit of the financial statements. If two reports are issued so if we are dealing with two reports here one for the financial statements one day for the internal control over financial reporting they have to reference each other and we will see how in a moment. Before we proceed any further I have a public announcement about my company farhatlectures.com. Farhat Accounting Lectures is a supplemental educational tool that's gonna 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. The best way to look at this is to actually look at the report itself and what's what I like about the reports are they summarizes they summarizes everything that we did who's responsible for what at this point. So this is a separate report we'll have an introductory paragraph. First it's it have to say report of independent register PCAOB for public accounting firm which is the word independent has to be there. Notice it's to the shareholders and the board of directors. We assume obviously the shareholders are outsider the board of directors we assume they are independent. We have audited Adam's company internal control over financial reporting as of the date based on the criteria which we're going to be assuming COSO. Now the company is responsible for maintaining effective internal control over financial reporting and our responsibility is to express an opinion on the management internal control over financial reporting. So on the introductory paragraph we say what we what we did what's management responsible for what are we responsible for. Then we will have a scope paragraph and the scope paragraph we just talk about how do we conducted our audit in according with PCAOB United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective control over financial reporting what was maintained in all material respect. Our internal control audit over financial reporting including an understanding of the internal control. Remember we have to understand the internal control we have to test and evaluate its design and operating effectiveness. Basically it's what we did throughout the integrated audit. Our audit also included performing such procedures as we consider necessary in search circumstances. We believe that our audit provide a reasonable basis for our opinion. So this is the scope. Then we will give you the definition of internal control. I am not going to read this because we saw this for the non-assure. You can pause and read this basically the definition what is internal control and this is a boilerplate definition. If you don't know what internal control is this is a boilerplate definition. Then we will have also inherent limitation paragraph. Simply put we have to remind you although this is what internal control do making sure provide reasonable assurance that the transaction are recorded provide reasonable assurance regarding prevention or timely deduction of unauthorized acquisition use or disposition. We have to remind you that there's always inherent limitation that the internal control may not be working as expected. Just want to remind you that it's not a perfect system. That's what the inherent limitation is. So because of the inherent limitation internal control over financial reporting may not prevent or detect the statement. Also projections important of any evaluation of the effectiveness the future period is subject to the risk and control may become inadequate because of the changes in condition or that the degree of compliance with the policies or procedures may deteriorate. So look don't don't project too much into the future because things could change. Then at the end we will have our opinion. Adam company maintain an all material respect effective internal control based on the identified control criteria we assume Koso. Then we have a reference to what to the financial statement audit because remember this is a separate report this report only internal control over financial reporting. Therefore we have to mention that we also have a report for the auditing of financial statements. We sign city or state or country wherever we are doing and we date or we can issue a combined report. Where is a combined report? It's a one report where the internal control over financial reporting plus the financial statement audit are in the same report. Again the word independent to the shareholders. Notice its opinions because we're issuing more than one opinion. Opinions on the financial statements. Remember financial statement plus internal control over financial reporting. Now we're going to talk about both of them. We have audited the balance sheet as well as the financial statement. We list them for the period for the period. We have also audited the company's internal control over financial reporting. This is what we did. Now what is our opinion? In our opinion the financial statement present fairly in all material respect. So for the financial statements according to Gab they are fairly presented. Also in our opinion the company maintain an all material respect effective control over financial reporting based on the identified criteria we assume COSO. So notice here we are giving a clean opinion on both financial statements and internal control over financial reporting. Then we're going to have the basis for the opinion. Then we talk about management responsibility. Obviously management responsibility is to maintain effective internal control over financial reporting and for its assessment of the effectiveness so on and so forth. What did we do? We conducted our audit basically just same thing as we spoke in the other in the other paragraph. Those standards required that we plan and perform our audit to obtain reasonable assurance that the whether the financial statements are free from material in the statement. I did not mean the previous report when we do a financial statement report. This is basically again standard boiler plate type of language. Our audit included performing procedures to assess the risk of material in the statement of the financial statements whether due to error or fraud. Our audit included evaluation of accounting principle basically one we whatever we talked about. Also our audit also included performing such other procedures as we consider necessary in the circumstances. We believe our audit provide a reasonable basis. Again same exact language. Also we will have a definition of internal control. What is internal control and inherent limitation? Basically the same thing. It just basically copied and pasted. Also at the end we will have if there's any should be critical audit matters we list them. The signature we have served the company as the company's auditor as of since whatever that year is. City and state or country date. The date it has to be the same for the internal control over financial reporting as well as the financial statement and the date cannot be earlier than the date on which sufficient appropriate evidence has been obtained. Now this is a clean opinion. Sometime we might have to give an adverse opinion. Under what circumstances just like non-assures one material weakness and if you don't know what material weaknesses go to the prior session will give you an adverse opinion. Think of material weakness a serious weakness in the internal control of our financial reporting. Okay. Include the definition of material weakness if we're giving an adverse opinion and refer to management assessment of the material weakness and if management doesn't include the material weakness then we state so in the report and we talk about the material weakness. Also we determine the effect the the effect of this adverse opinion on the financial statement opinion as well. Now we still have one session to go talking about when we have modified reports. So again we looked at clean and adverse. Those are the two extremes. Sometime we might have to change the language someplace in between. We might have a scope limitation as well as changing the language of the report. What should you do now? Go to far hat lectures, work MCQs, previously released AI CPA questions to help you understand and be able to answer questions about integrated audit on the CPA exam. Look study hard the CPA exam is worth it. Don't take any chances and stay safe.