Audit Reforms and Future Developments

Audit Reforms and Future Developments

Introduction

The purpose of this paper is to expand the boundaries of our knowledge by exploring some relevant facts and figures relating to the audit reforms and its future development. Most large profit and nonprofits organizations will obtain an annual financial audit. Usually, these audits done by CPAs. Whether or not a nonprofits organization is required by law to have an annual audit is generally determined by state requirements. One determining factor is the amount of public support the nonprofits organization receives. In addition, if the nonprofits organization issues bonds or has borrowed money from a financial institution, it may be required to have an annual audit. Even if, an organization, not required to have a thorough audit, it may be required to have a review, which is similar to an audit but smaller in scope. Finally, even if not required by law or by creditors, an organization may still elect to have its financial statements audited or reviewed by an independent auditor (Houghton, 2010)

The audit tests the financial information of the organization and determines if the financial statements are prepared in accordance with generally accepted accounting principles. Once this determination is made, the CPA issues an opinion about the financial statements. An unqualified opinion letter is issued if the CPA determines that the financial statements are prepared in accordance with GAAP. An unqualified opinion is the highest level of assurance that an audit can provide (Acereto, 2006). A qualified opinion letter issued if the CPA has reservations about something in the financial statements, such as a minor departure from GAAP. A qualified opinion letter serves as a caution to users of the financial statements and normally provides an explanation of the qualification. An adverse opinion indicates a major problem with the financial statements, which may not fairly represent the financial position of the organization. A disclaimer of an opinion is issued when the CPA cannot form an opinion about the financial statements, for example, because of incomplete accounting records (Hopwood, 2007).

Audits can be expensive. One way to reduce the expense of the annual audit is to be prepared. Meet with the auditor ahead of time and discuss the timing of the audit and what the auditors will need. If the auditors have to spend time looking for data and preparing schedules that staff could easily provide, the length and cost of the audit ...