The staff focused on the securities laws and regulatory practices in certain jurisdictions, which require an entity to reissue its previously issued audited annual financial statements in connection with an offering document when the most recently filed interim financial statements reflect matters that are accounted for retrospectively under the applicable accounting standards. Prior year's financial statements are restated following a change in reporting entity in the current year. Notify the predecessor auditor who may be required to revise the previously issued financial statements and auditor's report. A vote was taken and it was decided to do nothing, however the Chair made the suggestion that any reflections would be welcomed at the proceeding Committee meeting. If the auditor decides to include information regarding certain audit participants in the auditor's report, the auditor should use an appropriate section title. A representation letter from the principal underwriter would not provide this confirmation.
Companies may be more likely to make such changes now that a cumulative effect adjustment is not required in the year of change. Former client's attorney and management. Issue an updated comparative audit report indicating the division of responsibility. And, of course, if pre-tax income increases or decreases, there may be tax consequences. Indicate the substantive reasons for the qualification in the predecessor auditor's opinion. 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.
Be unable to express an opinion on the current year's resus of operations and cash flows. These events no longer are accounted for as a change in accounting principle but rather as a change in accounting estimate affected by a change in accounting principle. However, see section 711 as to an auditor's responsibility when his report is included in a registration statement filed under the Securities Act of 1933 and see section 508. Indicate the substantive reasons for the qualification in the predecessor auditor's OpiniOn. Note: When the current period's financial statements are presented on a comparative basis with those of one or more prior periods, the auditor may communicate critical audit matters relating to a prior period.
Express an unmodified opinion on the restated financial statements of the prior year. Critical audit matter — Any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: 1 relates to accounts or disclosures that are material to the financial statements and 2 involved especially challenging, subjective, or complex auditor judgment. There is nothing preventing the successor auditor from referencing the prior year's statements in this situation. The original auditor's report on the prior period should not be presented. Obtain a letter of representation from the successor auditor. The increase in audit time is expected to moderately increase audit fees, particularly if a reaudit of prior-period financial statements is necessary. The objective of these required procedures is to enable a predecessor auditor to consider whether the report previously issued is still appropriate, since it is possible that either their current form or manner of presentation, or one or more subsequent or subsequently discovered events, could make it inappropriate.
The successor auditor also is responsible for evaluating the preferability of the new principle and consistent period-to-period application. However, with respect to filings under the Securities Act of 1933, reference should be made to section 711. A change in accounting principle that is properly accounted for does not result in a qualified opinion. Ask the client to arrange a meeting among the three parties to discuss the information and attempt to resolve the matter. He questioned the practicality of the new pronouncement and believes there will be fewer voluntary changes as a result of Statement no.
In the former instance, the responsibility for events occurring subsequent to the original report date is limited to the specific event referred to in the note or otherwise disclosed. This avoids any implications that the auditor has re-examined any records, transactions, or events after the date of the original report. See Section 8 of the Investment Company Act. It is not used for comparative financial statements the date appropriate for the most recent audit is used in this case. Continue to express a qualified opinion on the prior year's financial statements.
These adjustments would include, for example, adjustments for changes in accounting policy that are applied retrospectively, but would not include changes in accounting estimates. An audit by the predecessor auditor, however, does not relieve the successor of all responsibilities related to the adjustments. Instead, they will report any necessary adjustment as an adjustment to the opening balance of retained earnings for the earliest period presented. This guidance enables the more popular reporting alternative of the successor auditor reporting on the restatement adjustments. You acknowledge that it will be necessary for us to apply additional procedures not presently contemplated to enable us to reissue our report if the financial statements we previously audited are determined to require retroactive restatement.
However, the effect on income from continuing operations, net income and per-share amounts of the current period should be disclosed for any change in estimate that affects several future periods. Further, where a revised audit report is issued, an adequate disclosure of the fact of the revision of the financial statements needs to made in the Notes on Accounts in the absence of which or where the note so put is considered inadequate, the auditor will have to include the fact of the revision in the revised audit report. Frequently the entity is able to choose from among two or more acceptable principles. Bear the same date as the original auditor's report on the prior period. The predecessor auditor is seeking independent confirmation regarding issues that might materially affect the previous financial statements.
Issue an updated comparative audit report indicating the division of responsibility. Dual date the reissued report. The corrections do not have to be disclosed in subsequent reports. This will increase the audit work to be performed, since auditors will have to audit the adjustments to the prior financial statements. Specifically state that the financial statements are not comparable to the prior year due to an uncertainty. Obtain an updated management representation letter and compare it to that obtained during the prior period audit.
Note: If the auditor communicates critical audit matters for prior periods, the language preceding the critical audit matters should be modified to indicate the periods to which the critical audit matters relate. Use the date of the previous report. The prior-period financial statements are restated in the current period to conform with generally accepted accounting principles. However, another audit partner who works primarily with private companies said nonpublic companies likely will look to the successor auditor to audit their retrospective adjustments for changes in principle. For audits of fiscal years beginning before December 15, 2010,. An audit report would indicate a division of responsibility when the principal auditor's opinion is based in part on the report of another auditor. Obtain a letter of representation from the successor auditor.