Qualified Report, Auditor's Decision Process, and Fraudulent Financial Reporting

Discussion Questions
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Q.1
A qualified report is a report where the auditor concludes that most financial information of a business entity has been adequately dealt with except for minor issues. The report is considered qualified in a case where the scope of the auditor's work is limited or the management has disagreement that relates to the application, acceptability, or adequacy of the policies in accounting (Kumar & Sharma, 2006). For the auditor, the issue must be financially worth or material to be considered in the qualification of the report. The issue here should not lead to a misinterpretation of the factual financial position (should not be pervasive). If an audit report is qualified, this does not mean that the business is suffering, or the business is not transparent it is a reflection of the inability of the auditor to provide a clean report (Kumar & Sharma, 2006). An unqualified audit report with explanatory paragraph or modified wording is a report that has met all the conditions and criteria of a satisfactory audit and financial statements are presented in truth and fairness. However, the auditor in this case feels it is necessary to provide extra information or modify the wordings of a standard unqualified report (Kumar & Sharma, 2006). The issuance of an appropriate unqualified report with an explanatory paragraph or modified wording can be provided in cases such as; where there is a significant doubt regarding the ongoing concern or where the auditor agrees there is a deviation from the accounting principles. In addition, it may occur where the application of the approved standards of accounting, where there are specific matters regarding the financial statements that require emphasis, and where others auditors are involved in developing the reports (Kumar & Sharma, 2006).
Q.2
For company auditors to be in a position to fulfill their role and responsibility to provide reports to their clients of the financial status of their businesses they have to follow a certain procedure and a series of activities known as the audit process. The audit process, the audit strategy, and approach decision comprises of four stages. These are pre-engagement activities; planning, risk assessment and responses; performing control tests and substantive procedures; and evaluation, concluding and reporting (Puttick, van Esch, & Van Esch, 2007).
Q.3
Accounting and auditing focuses on any activities that lead to materially misstated accounting statements. The intention determines whether these activities are done erroneously or fraudulently (Rezaee &...