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Unqualified With Explanatory Paragraph Or Modified Wording Accounting Essay

An audit report is an evaluation done by an internal or an external independent professional auditor, regarding the financial status of a business entity. Auditor will express his/her opinion on whether the information on the financial status of a company is free of any misrepresentations or not in the audit report. This report is essential for all the users of financial statements such as individuals, companies or government because it provides guarantee on a company’s financial statements since the users rely on audit report to make any decision. Audit report can be classified into two broad categories, unmodified audit report and modified audit report, which are then further classified as follows:
In short, auditor can issue five different types of audit reports, which are standard unqualified, unqualified with explanatory paragraph or modified wording, qualified, adverse and disclaimer of opinion. Each types of these report is representing a different circumstance faced by the auditor during the audit process and the auditor will express different opinions in each report.
Firstly, standard unqualified audit report, also known as clean opinion because the auditor’s opinion is not necessary to be qualified or modified. It is the best type of report that a company can receive and also the most common audit opinion. This report is issued when the auditor concludes that financial statements appear to be presented fairly and there are no any significant reservations or any material misstatements found within the financial statements presented. The standard unqualified audit report covers seven distinct parts:
Report title
Introductory paragraph
Scope paragraph
Opinion paragraph
Name of auditor
Auditor’s address
Audit report date.
Typically, the report title will consists the word “independent” to demonstrate that the audit report prepared is unbiased in all aspects. The introductory paragraph states the responsibilities and roles of management and the auditor and it is the first paragraph of the report; the scope paragraph is a factual statement regarding the action of the auditor in audit process; the opinion paragraph indicates the conclusion made by the auditor based on the audit result obtained and it is the last paragraph of the report. The name will identify the audit firm and the address show the location of the audit firm. The date will show when the audit process is completed.
For an auditor to issue a standard unqualified audit report, there are five specific conditions required to be met:
The financial statements must comprise all statements. (Statement of Cash Flow, Income Statement

Strategies To Resolve The Principal Agent Problem Accounting Essay

In general, the principal-agent problem refers to difficulties of motivating one party the agent to act for the best interest of the other party the principal. In a company, the owners of the assets (the stockholder) are the principals and the managers of the company are the agents. The stockholders of the company authorize the managers to manage and use their resources to make profit for the stockholders. (Kaskarelis, I. A. 2010) The cause of the principal-agent problem is that the information asymmetry between the principal and the agent and the principal and agent have different interests. (Ulrike, L.,