ACCA Advanced Audit and Assurance (AAA) Practice Exam

What must be included in the opinion paragraph of an auditor's report?

1. A detailed analysis of auditor's independence

2. Identification of the entity and the financial statements audited

3. An exhaustive description of all audit procedures performed

4. A summary of all misstatements identified

The correct answer is: Identification of the entity and the financial statements audited

In the opinion paragraph of an auditor's report, it is essential to identify the entity and the specific financial statements that have been audited. This identification provides clarity to users of the financial statements regarding which company and which set of financial records the auditor's opinion pertains to. It ensures that stakeholders understand the context of the audit and can adequately assess the reliability of the financial information presented. The inclusion of both the entity name and the financial statements is a fundamental requirement, aligning with auditing standards and the need for transparency. This not only helps in establishing the scope of the audit but also aids in maintaining the credibility of the report by clearly defining its subject matter. Other elements, such as a detailed analysis of auditor's independence, exhaustive descriptions of audit procedures performed, or summaries of misstatements, serve different purposes in the auditor's report but are not mandatory in the opinion paragraph itself. The opinion paragraph is focused primarily on providing the auditor's conclusion regarding the fairness and truthfulness of the financial statements being reported on.