Miles CPA Review: AUD Q3 2018 Updates for 2017 EditionPCAOB).pdfMiles CPA Review: AUD Q3 2018 Updates for 2017 Edition Summary of updates: -AUD-6 Appendix: Reports per PCAOB AS [Tested

Miles CPA Review AUD-6 Appendix

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Miles CPA Review: AUD

Q3 2018 Updates for 2017 Edition

Summary of updates:

- AUD-6 Appendix: Reports per PCAOB AS [Tested on CPA exams from Q3 2018; For old format PCAOB reports tested in Q1 & Q2 2018, refer Miles online content updates for Q1 2018]

AUD-6 Appendix Miles CPA Review

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AUD-6 Appendix: Reports per PCAOB AS [Tested on CPA exams from Q3 2018; For old format PCAOB reports tested in Q1 & Q2 2018, refer Miles online content updates for Q1 2018]

A-6.1) Audit Reports

I) Unqualified Opinion [PCAOB AS 3101: Unqualified Opinion]

II) Unqualified Opinion with Explanatory and/or Emphasis paragraph

III) GAAP Issue - Qualified Opinion vs. Adverse Opinion [PCAOB AS 3105: Departure from Unqualified]

IV) GAAS Issue - Qualified Opinion vs. Disclaimer Opinion

A-6.2) Audit of Comparative F/S [PCAOB AS 3105: Departure from Unqualified]

I) Prior period audited by the same auditor

II) Changing (updating) prior opinion

III) Prior period audited by other auditor

IV) Prior period not audited [PCAOB AS 3320: Association with F/S]

A-6.3) Supplementary Information

I) Other Info in Documents with Audited F/S [PCAOB AS 2710: Other Info with Audited F/S]

II) Required Supplementary Info [PCAOB AS 2705: Reqd. Supplementary Info]

III) Supplementary Info in relation to F/S [PCAOB AS 2701: Audit of Supplementary Info]

IV) Selected Quarterly Data [PCAOB AS 4105: Review of Interim F/S]

A-6.4) Audit of Group F/S [PCAOB AS 1205: Part Audit by Other Auditors]

A-6.5) Audit of Single F/S & [PCAOB AS 3105: Departure from Unqualified]

Specific F/S Elements/Accounts/Items [PCAOB AS 3305: Special Reports]

A-6.6) Audit of Special Purpose F/S [PCAOB AS 3305: Special Reports]

A-6.8) Other Engagements & Reports based on PCAOB AS

I) Review of Interim (Quarterly) F/S [PCAOB AS 4105: Review Interim F/S]

II) Condensed F/S & Selected Financial Data [PCAOB AS 3315: Condensed F/S, Selected Data]

III) Report on Compliance of Audited F/S [PCAOB AS 3305: Special Reports]

IV) Comfort Letter for Underwriters [PCAOB AS 6101: Letters for underwriters]

V) Application of Accounting Principles [PCAOB AS 6105: Application of GAAP]


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A-6.1) Audit Reports per PCAOB AS

I) Unqualified Opinion (Standard Audit Report)

PCAOB amended its auditor reporting standards that require the auditor to provide new

information about the audit and make the auditor’s report more informative and relevant to

investors and other F/S users

Makes significant changes to the existing auditor’s report, including:

Communication of “CAMs” (Critical Audit Matters) - Matters communicated or required to

be communicated to the audit committee and that:

Relate to accounts or disclosures that are material to F/S; AND

Involved especially challenging, subjective, or complex auditor judgment

Disclosure of auditor tenure - Statement disclosing the year in which the auditor began

serving consecutively as the company’s auditor

Other improvements to the auditor’s report - to clarify the auditor’s role & responsibilities,

make the auditor’s report easier to read, and provide a consistent format

Opinion to appear in the first section of the auditor’s report

Section titles added to guide the reader

Enhanced descriptions of the auditor’s role and responsibilities, including a statement

that the auditor is required to be independent

Effective date:

All provisions (other than those related to CAM) are effective December 15, 2017

Provisions related to CAM are effective

June 30, 2019, for large accelerated filers

December 15, 2020, for all other companies to which the requirements apply

SEC Approval: This standard has been approved by the SEC on October 23, 2017, and would be

tested on the CPA exams only from Q3 2018

Issuers = Audit per PCAOB AS


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Issuer unqualified F/S Report - including CAM (if separate reports are issued for F/S & ICFR audits):

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20X2, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of [at] December 31, 20X2 and 20X1, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20X2, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 20X2, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated [date of report, which should be the same as the date of the report on the financial statements], expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]

Disclose Auditor tenure

Communicate CAMs (effective June 30, 2019)


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Issuer unqualified ICFR Report (if separate reports are issued for F/S & ICFR audits):


To the Shareholders and the Board of Directors of XYZ Co.

Opinion on Internal Control over Financial Reporting

We have audited XYZ, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 20X3, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 20X3, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the [identify financial statements] of the Company and our report dated [date of report, which should be the same as the date of the report on the effectiveness of internal control over financial reporting] expressed [include nature of opinion].

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [title of management’s report]. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

[Signature]

[City and State or Country]

[Date]

Issuer = Audit of F/S "integrated" with Audit of ICFR (per PCAOB AS)

Separate report on ICFR


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Issuer unqualified Combined F/S and ICFR report (F/S audit report covered in AUD-6):


To the Shareholders and the Board of Directors of XYZ Co.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying balance sheets of XYZ, Inc. (the "Company") as of December 31, 20X3 and 20X2, and the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 20X3, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 20X3, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO criteria”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20X3 and 20X2, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 20X3 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 20X3, based on the COSO criteria.

Basis for Opinion

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [title of management’s report]. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters [if applicable, include critical audit matters]

[Signature]

We have served as the Company’s auditor since [year].

[City and State or Country | Date]

Auditor’s Report on I/C may be combined with the Auditor’s Report on F/S

Combined report on F/S + ICFR


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“CAMs” (Critical Audit Matters) -

Matters communicated or required to be communicated to the audit committee and that:

Relate to accounts or disclosures that are material to F/S; AND

Involved especially challenging, subjective, or complex auditor judgment; e.g.,

Significant management estimates and judgments made in preparing F/S

Areas of high F/S and audit risk

Significant unusual transactions

Other significant changes in F/S

Determined using a principles-based framework. Factors that the auditor should take into

account in determining CAM:

Auditor’s assessment of RMM, including significant risks

Degree of auditor judgment related to areas in F/S that involved the application of

significant judgment or estimation by management, including estimates with significant

measurement uncertainty

Nature & timing of significant unusual transactions and the extent of audit effort and

judgment related to these transactions

Degree of auditor subjectivity in applying audit procedures to address the matter or in

evaluating the results of those procedures

Nature & extent of audit effort required to address the matter, including the extent of

specialized skill or knowledge needed or the nature of consultations outside the

engagement team regarding the matter

Nature of audit evidence obtained regarding the matter

Communication of CAMs will provide investors and other F/S users with critical/relevant info

directly from the auditor. CAM communication requirements on the audit report:

If there are CAMs, need to communicate the CAMs in the audit report:

Identify the CAM

Describe the principal considerations that led the auditor to determine that the matter

is a CAM

Describe how the official audit matter was addressed in the audit

Refer to the relevant F/S accounts or disclosures that relate to the CAM

If there are no CAMs, include a statement in the auditor’s report that there are no CAMs

Note: CAMs are not a substitute for required explanatory paragraphs

There could also be situations in which a matter meets the definition of a CAM and also

requires an explanatory paragraph, such as going concern. In such cases, both the

explanatory paragraph and the required communication regarding the CAM need to be

provided (though the auditor may cross-reference, for instance, in the CAM section to the

explanatory paragraph; and the CAM section could provide incremental information, such

as how the matter was addressed in the audit)

Provisions related to CAM are effective

June 30, 2019, for large accelerated filers

December 15, 2020, for all other companies to which the requirements apply

CAMs = Info to investors about the difficult parts of the audit -

basically what kept the auditor awake at night!

On CPA exams only from Q3 2019


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Illustration for determining & communicating CAMs:


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II) Unqualified Opinion with Explanatory paragraph or Emphasis paragraph

In certain circumstances, the auditor may be required to add an “explanatory” paragraph to the auditor’s report without modifying the auditor’s opinion

GAAS & ISA use the terms “emphasis-of-matter” & “other-matter” paragraphs whereas PCAOB uses the term “explanatory” paragraph PCAOB allows “emphasis” paragraph for certain circumstances where it is optional (not

required) for auditors to include such a paragraph

Note: CAMs are not a substitute for required explanatory paragraphs. There could also be situations in which a matter meets the definition of a CAM and also requires an explanatory paragraph

“Explanatory” paragraph - Include explanatory language (or an explanatory paragraph) in the

auditor’s report, while not affecting the auditor’s opinion on F/S

Circumstances include: {Traditional GAAS reporting standards = “All Clean & Dirty Elements”!} Special purpose framework F/S - e.g., cash/tax/regulatory/contractual basis

Justified lack of Consistency (change in accounting principle, change in reporting entity not involving an event/transaction, correction of a material error in previously issued F/S)

Going Concern doubt appropriately presented/disclosed on F/S

Changing prior opinion - Subsequently discovered facts that lead to change in audit opinion

Circumstances also include: {Like a “SCAR” on Audit Report!} Supplementary Info (certain cases)

Material inconsistency in other information included alongside audited F/S

Refer to “required” supplementary information that a designated accounting standards setter requires to accompany an entity’s basic F/S

Selected quarterly financial data “required” by SEC Regulation S-K is not appropriately presented, has been omitted, or has not been reviewed

Comparative F/S (certain cases)

F/S of the prior period were audited by a predecessor auditor and the predecessor’s audit report is not reissued

Additional circumstances

Separate report issued on ICFR audit

Auditor not engaged to audit ICFR (e.g., non-accelerated filers, issuers who are emerging growth companies) but management still required to report on entity’s ICFR

Auditor decides to refer to the report of other auditors as the basis, in part, for the auditor’s own report

Report on compliance is included in the auditor’s report on the F/S Restrict use of audit report by an alert in the audit report; generally, included if special

purpose F/S prepared in accordance with a contractual or regulatory basis of accounting

GR = Immediately after the opinion para

A

C

D

E

S

C

A

R


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“Emphasis” paragraph - Auditor may emphasize a matter regarding F/S in the auditor’s report Uncertainty & Other Circumstances (optional) - Appropriately presented/disclosed in F/S

but auditor still considers necessary to emphasize. E.g.,

Uncertainty related to outcome of unusually important litigation or regulatory action

Unusually important subsequent events; e.g., major catastrophe having a significant effect on the entity’s financial position

Significant related party transactions

That the entity is a component of a larger business enterprise

SAS (for non-issuers) vs. PCAOB AS (for issuers)

UNMODIFIED OPINION with

“Emphasis-of-Matter” Para

- A: Special purpose framework F/S (Non-GAAP)

- C: Justified lack of Consistency - D: Going Concern doubt - D: Uncertainty & Other

Circumstances (optional) - E: Changing prior opinion

“Other-Matter” Para

- Supplementary Info (certain cases) - Comparative F/S (certain cases) - Additional circumstances - Restrict use of audit report (also

for contractual/regulatory special purpose non-GAAP F/S) -

SAS

UNQUALIFIED OPINION with

PCAOB AS

“Explanatory” Para

- A: Special purpose framework F/S (Non-GAAP)

- C: Justified lack of Consistency - D: Going Concern doubt - E: Changing prior opinion

- Supplementary Info (certain cases)

- Comparative F/S (certain cases)

- Additional circumstances

- Restrict use of audit report (also for contractual/regulatory special purpose non-GAAP F/S)

“Emphasis” Para

- D: Uncertainty & Other Circumstances (optional)


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Information about Certain Audit Participants

Form AP (Auditor Reporting of Certain Audit Participants) - Required to be filed with the PCOAB by registered public accounting firms for each issuer audit report issued by the firm Provides information about engagement partners and accounting firms that participated in

the issuer audit Due by the 35th day after the date the audit report is first included in a document filed with

the SEC (e.g., within 35 days of filing of Form 10K by the issuer)

Due within 10 days of such filing if the audit report was first included in a registration statement filed with the SEC

“Optional” inclusion - On the auditor’s report , auditor may include below information (which is “required” to be reported on PCAOB Form AP) Engagement partner’s full name; and/or Other accounting firms participating in the audit—

Statement that the auditor is responsible for the audits or audit procedures performed by the other public accounting firms and has supervised or performed procedures to assume responsibility for their work in accordance with PCAOB standards

Other accounting firms individually contributing 5% or more of total audit hours - for each firm, need to disclose: - Firm’s legal name, - City and state (or, if outside the US, city and country) of headquarters' office, and - % of total audit hours as a single number or within an appropriate range

Other accounting firms individually contributing less than 5% of total audit hours - need to disclose: - Number of such other accounting firms, and - Aggregate % of total audit hours of such firms as a single number or within an

appropriate range


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III) GAAP Issue - Qualified Opinion vs. Adverse Opinion

Illustration of Qualified Opinion due to departure from GAAP:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, except for the effects of not capitalizing certain lease obligations as discussed in the following paragraph, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The Company has excluded, from property and debt in the accompanying balance sheets, certain lease obligations that, in our opinion, should be capitalized in order to conform with accounting principles generally accepted in the United States of America. If these lease obligations were capitalized, property would be increased by $_______ and $_______, long-term debt by $_______ and $_______, and retained earnings by $_______ and $_______ as of December 31, 20X2 and 20X1, respectively. Additionally, net income would be increased (decreased) by $_______ and $_______ and earnings per share would be increased (decreased) by $_______ and $_______, respectively, for the years then ended. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


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Illustration of Qualified Opinion due to inadequate disclosure:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, except for the omission of the information discussed in the following paragraph, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The Company’s financial statements do not disclose [describe the nature of the omitted disclosures]. In our opinion, disclosure of this information is required by accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


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Illustration of Adverse Opinion due to departure from GAAP:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, because of the effects of the matters discussed in the following paragraphs, the financial statements do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 20X2 and 20X1, or the results of its operations or its cash flows for the years then ended. As discussed in Note X to the financial statements, the Company carries its property, plant and equipment accounts at appraisal values, and provides depreciation on the basis of such values. Further, the Company does not provide for income taxes with respect to differences between financial income and taxable income arising because of the use, for income tax purposes, of the installment method of reporting gross profit from certain types of sales. Accounting principles generally accepted in the United States of America require that property, plant and equipment be stated at an amount not in excess of cost, reduced by depreciation based on such amount, and that deferred income taxes be provided. Because of the departures from accounting principles generally accepted in the United States of America identified above, as of December 31, 20X2 and 20X1, inventories have been increased $_______ and $_______ by inclusion in manufacturing overhead of depreciation in excess of that based on cost; property, plant and equipment, less accumulated depreciation, is carried at $_______ and $_______ in excess of an amount based on the cost to the Company; and deferred income taxes of $_______ and $_______ have not been recorded; resulting in an increase of $_______ and $_______ in retained earnings and in appraisal surplus of $_______ and $_______, respectively. For the years ended December 31, 20X2 and 20X1, cost of goods sold has been increased $_______ and $_______, respectively, because of the effects of the depreciation accounting referred to above and deferred income taxes of $_______ and $_______ have not been provided, resulting in an increase in net income of $_______ and $_______, respectively. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]

No CAMs - as most important matter for

users here is “why adverse opinion”?


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IV) GAAS Issue - Qualified Opinion vs. Disclaimer

Illustration of Qualified Opinion due to a Scope Limitation:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20X2, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, except for the effects of the adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding the foreign affiliate investment and earnings, as described below, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. We were unable to obtain audited financial statements supporting the Company’s investment in a foreign affiliate stated at $_______ and $_______ at December 31, 20X2 and 20X1, respectively, or its equity in earnings of that affiliate of $_______ and $_______, which is included in net income for the years then ended as described in Note X to the financial statements; nor were we able to satisfy ourselves as to the carrying value of the investment in the foreign affiliate or the equity in its earnings by other auditing procedures. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Except as discussed above, we conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


16

Illustration of Disclaimer of Opinion due to Scope Limitation:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Disclaimer of Opinion on the Financial Statements We were engaged to audit the accompanying balance sheets of X Company (the "Company") as of December 31, 20X2 and 20X1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20X2, and the related notes and schedules (collectively referred to as the "financial statements"). As described in the following paragraph, because the Company did not take physical inventories and we were not able to apply other auditing procedures to satisfy ourselves as to inventory quantities and the cost of property and equipment, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements, and we do not express, an opinion on these financial statements. The Company did not make a count of its physical inventory in 20X2 or 20X1, stated in the accompanying financial statements at $_______ as of December 31, 20X2, and at $________ as of December 31, 20X1. Further, evidence supporting the cost of property and equipment acquired prior to December 31, 20X1, is no longer available. The Company’s records do not permit the application of other auditing procedures to inventories or property and equipment. Basis for Disclaimer of Opinion These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]

Delete reference to auditor’s responsibility

No CAMs - as most important matter

for users here is “why disclaimer”?


17

A-6.2) Audit of Comparative F/S per PCAOB AS

I) Prior period audited by the same auditor

Comparative F/S (Same auditor) - Standard Unqualified Y1, Qualified Y2

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of ABC Company (the "Company") as of December 31, 20Y2 and 20Y1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20Y2, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, except for the effects on the 20Y2 financial statements of not capitalizing certain lease obligations as described in the following paragraph, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20Y2 and 20Y1, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The Company has excluded, from property and debt in the accompanying 20Y2 balance sheet, certain lease obligations that were entered into in 20Y2 which, in our opinion, should be capitalized in order to conform with accounting principles generally accepted in the United States of America. If these lease obligations were capitalized, property would be increased by $_______, long-term debt by $_______, and retained earnings by $_______ as of December 31, 20Y2, and net income and earnings per share would be increased (decreased) by $_______ and $_______, respectively, for the year then ended. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


18

Unable to observe prior year (Y1) beginning inventory - Disclaim Y1 I/S, S/E & C/F, Unqualified Y2

Inventory = ok Inventory = ok Inventory = ?

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of ABC Company (the "Company") as of December 31, 20Y2 and 20Y1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20Y2, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the balance sheets of the Company as of December 31, 20Y2 and 20Y1, and the related statements of income, retained earnings, and cash flows for the year ended December 31, 20Y2, present fairly, in all material respects, the financial position of the Company as of December 31, 20Y2 and 20Y1, and the results of its operations and its cash flows for the year ended December 31, 20Y2, in conformity with accounting principles generally accepted in the United States of America. Because of the matter discussed in the following paragraph, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the results of operations and cash flows, and we do not express, an opinion on the results of operations and cash flows for the year ended December 31, 20Y1. We did not observe the taking of the physical inventory as of December 31, 20Y0, since that date was prior to our appointment as auditors for the Company, and we were unable to satisfy ourselves regarding inventory quantities by means of other auditing procedures. Inventory amounts as of December 31, 20Y0, enter into the determination of net income and cash flows for the year ended December 31, 20Y1. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Except as explained above, we conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]

Disclaim I/S + C/F + S/E, B/S = ok

B/S + I/S + C/F + S/E = ok Y2 Y1 Y0


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II) Changing (updating) prior opinion

Changing opinion on Prior Year

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying balance sheets of X Company (the "Company") as of December 31, 20Y2 and 20Y1, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 20Y2, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of [at] December 31, 20Y2 and 20Y1, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20Y2, in conformity with accounting principles generally accepted in the United States of America. In our report dated March 1, 20Y2, we expressed an opinion that the 20Y1 financial statements did not fairly present financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America because of two departures from such principles: (1) the Company carried its property, plant, and equipment at appraisal values, and provided for depreciation on the basis of such values, and (2) the Company did not provide for deferred income taxes with respect to differences between income for financial reporting purposes and taxable income. As described in Note X, the Company has changed its method of accounting for these items and restated its 20Y1 financial statements to conform with accounting principles generally accepted in the United States of America. Accordingly, our present opinion on the 20Y1 financial statements, as presented herein, is different from that expressed in our previous report. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


20

III) Prior period audited by other auditor (predecessor)

Report of predecessor auditor presented - Predecessor’s audit report reissued and included along

with current’s audit report

Report of predecessor auditor not presented - Current auditor expresses an opinion on current

period F/S only and refers to the predecessor’s prior period F/S audit report in an explanatory

paragraph (without naming the predecessor)

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company Opinion on the Financial Statements We have audited the accompanying balance sheet of ABC Company (the "Company") as of December 31, 20X2, the related statements of income, comprehensive income, stockholders' equity, and cash flows, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the 20Y2 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20X2, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The financial statements of the Company as of December 31, 20X1, were audited by other auditors whose report dated March 31, 20X2, expressed an unqualified opinion on those statements. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


21

A-6.3) Supplementary Information per PCAOB AS

Overview of additional audit procedures & reporting for supplementary info

SUPPLEMENTARY INFO Effect on fieldwork Reporting if found ok

Reporting if inconsistencies / misstatements / omissions

Other Info in documents containing Audited F/S

Read for consistency

N/A Include explanatory para (with appropriate title) - Report the inconsistency

Required by FASB (or GASB)

Limited procedures (esp. inquire, compare, obtain rep. letter)

N/A

Include explanatory para (with appropriate title) - Disclaim the Supplementary Info and report any misstatements/omission (or if auditor was unable to perform prescribed procedures, or has unresolved doubts)

Supplementary Info in Relation to Audited F/S as a whole [Auditor asked to express opinion on Supplementary Info]

Audit procedures (unless disclaiming on the info)

Include in F/S audit report - Express opinion on Supplementary Info OR Present separate report - Separate report should identify the auditor’s report on F/S

Selected quarterly financial data required by Item 302(a) of Regulation S-K of the SEC

Review procedures (unless the auditor is unable to review)

Include explanatory para (with an appropriate title) - Report if omission or if auditor was unable to review [Note: For any misstatements of quarterly data, these would ordinarily be reflected in the auditor’s separate review report; so no effect on audit report]

(i)

(ii)

(iii)

(iv)


22

A-6.4) Audit of Group F/S

(i.e., Part of the Audit Performed by Other

Independent Auditors)

Illustration of Auditor’s Report indicating Division of Responsibility with Other Auditors:


To the shareholders and the board of directors of X Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of X Company (the "Company") and subsidiaries as of December 31, 20...., and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year then ended, and the related notes and schedules (collectively referred to as the "consolidated financial statements"). In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of X the Company as of December 31, 20...., and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. We did not audit the financial statements of B Company, a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 20 percent and 22 percent, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for B Company, is based solely on the report of the other auditors. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


23

A-6.5) Audit of Single F/S and

Specific F/S Elements/Accounts/Items

Illustration of Auditor’s Report on Single F/S (prepared in accordance with US GAAP):

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of X Company Opinion on the Financial Statement We have audited the accompanying balance sheet of X Company (the "Company") as of December 31, 20XX, and the related notes and schedules (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 20XX, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. Critical Audit Matters [if applicable] [Include critical audit matters] [Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


24

Illustration of Auditor’s Report on F/S Element (prepared in accordance with US GAAP):

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company We have audited the accompanying schedule of accounts receivable of ABC Company as of December 31, 20X2. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this schedule based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the schedule of accounts receivable is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedule of accounts receivable. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall schedule presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the schedule of accounts receivable referred to above presents fairly, in all material respects, the accounts receivable of ABC Company as of December 31, 20X2, in conformity with accounting principles generally accepted in the United States of America. [Signature] [City and State or Country] [Date]

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A-6.6) Audit of Special Purpose F/S

Illustration of Auditor’s Report on Special purpose F/S prepared in accordance with regulatory

basis (Not intended for General Use):

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company We have audited the accompanying statements of admitted assets, liabilities, and surplus—statutory basis of XYZ Insurance Company as of December 31, 20X2 and 20X1, and the related statements of income and cash flows—statutory basis and changes in surplus—statutory basis for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note X, these financial statements were prepared in conformity with the accounting practices prescribed or permitted by the Insurance Department of [State], which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, and surplus of XYZ Insurance Company as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for the years then ended, on the basis of accounting described in Note X. This report is intended solely for the information and use of the board of directors and management of XYZ Insurance Company and [name of regulatory agency] and is not intended to be and should not be used by anyone other than these specified parties. [Signature] [City and State or Country] [Date]

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26

Illustration of Auditor’s Report on Special purpose F/S prepared on entity’s income tax basis:

Illustration of Auditor’s Report on Special purpose F/S prepared on cash basis:


To the shareholders and the board of directors of ABC Company

We have audited the accompanying statements of assets, liabilities, and capital - income tax basis of ABC Partnership as of December 31, 20X2 and 20X1, and the related statements of revenue and expenses - income tax basis and of changes in partners' capital accounts - income tax basis for the years then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note X, these financial statements were prepared on the basis of accounting the Partnership uses for income tax purposes, which is a comprehensive basis of accounting other than generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and capital of ABC Partnership as of [at] December 31, 20X2 and 20X1, and its revenue and expenses and changes in partners' capital accounts for the years then ended, on the basis of accounting described in Note X.

[Signature] [City and State or Country] [Date]


To the shareholders and the board of directors of ABC Company

We have audited the accompanying statements of assets and liabilities arising from cash transactions of XYZ Company as of December 31, 20X2 and 20X1, and the related statements of revenue collected and expenses paid for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note X, these financial statements were prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities arising from cash transactions of XYZ Company as of December 31, 20X2 and 20X1, and its revenue collected and expenses paid during the years then ended, on the basis of accounting described in Note X.

[Signature] [City and State or Country] [Date]


27

A-6.8) Other Engagements & Reports based on

PCAOB AS

I) Review of Interim (Quarterly) F/S

Background: SEC requires US issuers to file annual “audited” F/S (included in Form 10K) as well as quarterly “reviewed” F/S (included in Form 10Q)

Generally, the auditor of the annual F/S reviews the quarterly F/S

Note that review of quarterly F/S is per PCAOB AS and is “required” for US issuers

Illustration of Standard Review Report for a public company (as per PCAOB AS)

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company Results of Review of Interim [Financial Information or Statements] We have reviewed the accompanying [describe the interim financial information or statements reviewed] of ABC Company (the "Company") and consolidated subsidiaries as of September 30, 20X1, and for the three-month and nine-month periods then ended, and the related notes [and schedules] (collectively referred to as the "interim financial information or statements"). Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information (statements) for it (them) to be in conformity with accounting principles generally accepted in the United States of America. Basis for Review Results This (These) interim financial information (statements) is (are) the responsibility of the Company’s management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. [Signature] [City and State or Country] [Date]

Audit of annual F/S + Review of interim F/S


28

II) Report on Condensed F/S and Selected Financial Data

Condensed F/S

Background: Condensed F/S (either for an annual or an interim period)

Derived from audited F/S of an issuer that is required to file, at least annually, complete audited

F/S with a regulatory agency

Presented in considerably less detail than complete F/S (and so should be read in conjunction

with the entity’s most recent complete F/S that include all the disclosures required by GAAP)

Illustration of Auditor’s Report on Condensed F/S (separate report):

Report of Independent Registered Public Accounting Firm We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheet of X Company and subsidiaries as of December 31, 20X0, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 15, 20X1, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived.

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Selected Financial Data

Background: Selected financial data may be included in a client-prepared document that contains

audited F/S (or, with respect to a public entity, that incorporates such statements by reference to

information filed with a regulatory agency). Selected financial data are not a required part of the

basic F/S, and the entity’s management is responsible for determining the specific selected

financial data to be presented

Auditor’s Report: If the auditor is engaged to report on the selected financial data, his report

should be limited to data that are derived from audited F/S (which may include data that are

calculated from amounts presented in the financial statements, such as working capital)

If the selected financial data that management presents include both data derived from audited

F/S and other information (such as number of employees or square footage of facilities), the

auditor’s report should specifically identify the data on which he is reporting.

Illustration where auditor is engaged to report on selected financial data for a five-year period in

a client-prepared document that includes audited F/S (additional paragraph included in the

Opinion on F/S section of the auditor’s report):


To the shareholders and the board of directors of X Company

Opinion on the Financial Statements [Same as standard report]

We have also previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets as of December 31, 20X3, 20X2, and 20X1, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the years ended December 31, 20X2, and 20X1, and the related notes [and schedules] (collectively referred to as the "20X3, 20X2, and 20X1 consolidated financial statements") (none of which are presented herein); and we expressed unqualified opinions on those 20X3, 20X2, and 20X1 consolidated financial statements. In our opinion, the information set forth in the selected financial data for each of the five years in the period ended December 31, 20X5, appearing on page xx, is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived.

Basis for Opinion [Same as standard report]

Critical Audit Matters [if applicable] [Include critical audit matters]

[Signature] We have served as the Company’s auditor since [year]. [City and State or Country] [Date]


30

III) Report on Compliance of Audited F/S

Illustration of Auditor’s Report on Compliance of Audited F/S (if no identified instances of non-

compliance):


[Appropriate Addressee]

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheet of XYZ Company as of December 31, 20X2, and the related statement of income, retained earnings, and cash flows for the year then ended, and have issued our report thereon dated February 16, 20X3.

In connection with our audit, nothing came to our attention that caused us to believe that the Company failed to comply with the terms, covenants, provisions, or conditions of sections XX to YY, inclusive, of the Indenture dated July 21, 20X0, with ABC Bank insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance.

This report is intended solely for the information and use of the boards of directors and management of XYZ Company and ABC Bank and is not intended to be and should not be used by anyone other than these specified parties.

[Auditor’s Signature] [Auditor’s City & State] [Date of the Auditor’s Report]

Old PCAOB report

format continues


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IV) Comfort Letter for Underwriters

Example of a typical comfort letter (Note: Content may vary, depending on the extent of the

information in the registration statement and the wishes of underwriter or other requesting party)

Letter from CPA → Underwriter

June 28, 20X6

[Appropriate Addressee]

Dear Sirs:

We have audited the consolidated balance sheets of The Blank Company, Inc. (the company) and subsidiaries as of December 31, 20X5 and 20X4, and the consolidated statements of income, retained earnings (stockholders' equity), and cash flows for each of the three years in the period ended December 31, 20X5, and the related financial statement schedules all included in the registration statement (no. 33-00000) on Form S-1 filed by the company under the Securities Act of 2033 (the Act); our reports with respect thereto are also included in that registration statement. The registration statement, as amended on June 28, 20X6, is herein referred to as the registration statement.

In connection with the registration statement— 1. We are independent certified public accountants with respect to the company within the meaning of the Act and the applicable rules and regulations thereunder adopted by the SEC. 2. In our opinion [include the phrase "except as disclosed in the registration statement," if applicable], the consolidated financial statements and financial statement schedules audited by us and included in the registration statement comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC. 3. We have not audited any financial statements of the company as of any date or for any period subsequent to December 31, 20X5; although we have conducted an audit for the year ended December 31, 20X5, the purpose (and therefore the scope) of the audit was to enable us to express our opinion on the consolidated financial statements as of December 31, 20X5, and for the year then ended, but not on the financial statements for any interim period within that year. Therefore, we are unable to and do not express any opinion on the unaudited condensed consolidated balance sheet as of March 31, 20X6, and the unaudited condensed consolidated statements of income, retained earnings (stockholders' equity), and cash flows for the three-month periods ended March 31, 20X6 and 20X5, included in the registration statement, or on the financial position, results of operations, or cash flows as of any date or for any period subsequent to December 31, 20X5. 4. For purposes of this letter we have read the 20X6 minutes of meetings of the stockholders, the board of directors, and [include other appropriate committees, if any] of the company and its subsidiaries as set forth in the minute books at June 23, 20X6, officials of the company having advised us that the minutes of all such meetings through that date were set forth therein; we have carried out other procedures to June 23, 20X6, as follows (our work did not extend to the period from June 24, 20X6, to June 28, 20X6, inclusive):

a. With respect to the three-month periods ended March 31, 20X6 and 20X5, we have— i. Performed the procedures specified by the Public Company Accounting Oversight Board (United States)

for a review of interim financial information as described in AS 4105, Reviews of Interim Financial Information, on the unaudited condensed consolidated balance sheet as of March 31, 20X6, and unaudited condensed consolidated statements of income, retained earnings (stockholders' equity), and cash flows for the three-month periods ended March 31, 20X6 and 20X5, included in the registration statement.

ii. Inquired of certain officials of the company who have responsibility for financial and accounting matters whether the unaudited condensed consolidated financial statements referred to in a(i) comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC.

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b. With respect to the period from April 1, 20X6, to May 31, 20X6, we have—

i. Read the unaudited consolidated financial statements of the company and subsidiaries for April and May of both 20X5 and 20X6 furnished us by the company, officials of the company having advised us that no such financial statements as of any date or for any period subsequent to May 31, 20X6, were available.

ii. Inquired of certain officials of the company who have responsibility for financial and accounting matters whether the unaudited consolidated financial statements referred to in b(i) are stated on a basis substantially consistent with that of the audited consolidated financial statements included in the registration statement.

The foregoing procedures do not constitute an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board. Also, they would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, we make no representations regarding the sufficiency of the foregoing procedures for your purposes. 5. Nothing came to our attention as a result of the foregoing procedures, however, that caused us to believe that— a.

i. Any material modifications should be made to the unaudited condensed consolidated financial statements described in 4a(i), included in the registration statement, for them to be in conformity with generally accepted accounting principles.

ii. The unaudited condensed consolidated financial statements described in 4a(i) do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC.

b. i. At May 31, 20X6, there was any change in the capital stock, increase in long-term debt, or decrease in

consolidated net current assets or stockholders' equity of the consolidated companies as compared with amounts shown in the March 31, 20X6, unaudited condensed consolidated balance sheet included in the registration statement, or

ii. for the period from April 1, 20X6, to May 31, 20X6, there were any decreases, as compared to the corresponding period in the preceding year, in consolidated net sales or in the total or per-share amounts of income before extraordinary items or of net income, except in all instances for changes, increases, or decreases that the registration statement discloses have occurred or may occur.

6. As mentioned in 4b, company officials have advised us that no consolidated financial statements as of any date or for any period subsequent to May 31, 20X6, are available; accordingly, the procedures carried out by us with respect to changes in financial statement items after May 31, 20X6, have, of necessity, been even more limited than those with respect to the periods referred to in 4. We have inquired of certain officials of the company who have responsibility for financial and accounting matters whether (a) at June 23, 20X6, there was any change in the capital stock, increase in long-term debt or any decreases in consolidated net current assets or stockholders' equity of the consolidated companies as compared with amounts shown on the March 31, 20X6, unaudited condensed consolidated balance sheet included in the registration statement or (b) for the period from April 1, 20X6, to June 23, 20X6, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net sales or in the total or per-share amounts of income before extraordinary items or of net income. On the basis of these inquiries and our reading of the minutes as described in 4, nothing came to our attention that caused us to believe that there was any such change, increase, or decrease, except in all instances for changes, increases, or decreases that the registration statement discloses have occurred or may occur. 7. This letter is solely for the information of the addressees and to assist the underwriters in conducting and documenting their investigation of the affairs of the company in connection with the offering of the securities covered by the registration statement, and it is not to be used, circulated, quoted, or otherwise referred to within or without the underwriting group for any purpose, including but not limited to the registration, purchase, or sale of securities, nor is it to be filed with or referred to in whole or in part in the registration statement or any other document, except that reference may be made to it in the underwriting agreement or in any list of closing documents pertaining to the offering of the securities covered by the registration statement.


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V) Report on Application of accounting principles

Illustration of Reporting Accountant’s written report to the requesting party (e.g., management

or TCWG) on the application of US GAAP requirements to a specific transaction:

By Reporting Accountant = CPA other than Auditor

Introduction We have been engaged to report on the appropriate application of the requirements of accounting principles generally accepted in the United States of America to the specific transaction described below. This report is being issued to ABC Company for assistance in evaluating accounting policies for the described specific transaction. Our engagement has been conducted in accordance with standards of the Public Company Accounting Oversight Board (United States). Description of Transaction The facts, circumstances, and assumptions relevant to the specific transaction as provided to us by the management of ABC Company are as follows: [Text discussing the facts, circumstances, and assumptions relevant to the specific transaction] Appropriate Accounting Principles [Text discussing accounting principles generally accepted in the United States of America and how they apply to the described transaction] Concluding Comments The ultimate responsibility for the decision on the appropriate application of the requirements of accounting principles generally accepted in the United States of America for an actual transaction rests with the preparers of financial statements, who should consult with their continuing accountant. Our conclusion on the appropriate application of the requirements of accounting principles generally accepted in the United States of America for the described specific transaction is based solely on the facts provided to us as previously described; should these facts and circumstances differ, our conclusion may change. Restricted Use This report is intended solely for the information and use of those charged with governance and management of ABC Company and is not intended to be and should not be used by anyone other than these specified parties.


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(This page is left blank for any reference notes on

Appendix: Reports per PCAOB AS)