Assignment: Insufficient Evidentiary Matter

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Assignment: Insufficient Evidentiary Matter

Assignment: Insufficient Evidentiary Matter

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Independent auditors typically audit the healthcare organization once each year. The duration of the audit partially depends on the size of the organization. At the end of the audit, the independent auditor produces an audit report made up of three paragraphs:

1. The introductory paragraph identifies the financial statements audited, management’s responsibilities in preparing the financial statements, and the auditor’s responsibilities in expressing the audit opinion.

2. The scope paragraph describes the criteria used in the audit (for instance, GAAP).

3. The opinion paragraph includes the auditor’s statement about whether the financial statements are in the correct accounting format.

A fourth paragraph, the explanatory paragraph, is included only if GAAP were not used in preparing the financial statements or if any uncertainty exists regarding how the financial statements were prepared. The AICPA Audit and Accounting Guide for Health Care Entities (2010) provides examples of audit reports, including the four types of opinions referenced next.

The opinion paragraph is the heart of the audit report. Independent auditors use four types of opinions in rendering their reports:

1. An unqualified opinion means that, in all material respects, the financial statements fairly present the financial position, results of operations, and cash flows of the organization in conformance with GAAP. An unqualified opinion may have an additional explanatory paragraph, but an explanatory paragraph does not affect the opinion. Auditors use an explanatory paragraph when they are basing their opinion in part on the work of another external auditor, or when they need additional information to prevent the audit report from being misleading when uncertainties exist that they cannot reasonably resolve by the publication date of the audit report.

2. A qualified opinion means that the financial statements fairly present, in all material respects, the financial position, results of operations, and cash flows of the organization in conformance with GAAP, except for matters identified in additional paragraphs of the report. Auditors use a qualified opinion when there is insufficient evidentiary matter, when the organization has placed restrictions on the scope of the audit, or when the financial statements depart in a material, though not substantial, manner from GAAP.


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