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A. What type of opinion did the auditors issue on Google’s financial statements for 2007? What is the date of the audit opinion? Explain why the opinion date is different than the date of the financial statements.
Ernst & Young provides an unqualified opinion following their review of Google’s financial statements. They state that Google has performed effective internal control over their financial reporting, but they do go onto state that they changed their accounting methods in previous years as a note. The date of the audit, February 14th, is later than the issuance of the statements, January 31st, because the auditors must wait for the statements to be finalized before performing their review. It’s standard protocol for auditors to come out with their opinion 30-60 days following the closing of the books. It’s more common for fraud to occur towards the end of a fiscal year when goals/expectations need to be met so the auditors need to wait until the books are closed to begin their review.
B. Managers often report ‘pro-forma’ or ‘non-GAAP’ earnings as supplemental information when reporting their GAAP earnings.
i. What info can a pro-forma earnings number provide that the GAAP earnings number does not? Give examples of possible differences that might exist between the two earnings numbers.
The pro-forma number can provide a better baseline representation of the net income when unique, one-time, or unusual expenses are not figured into the calculation of the net income. Charge-offs, restructuring charges, changes in GAAP policies, etc will draw down the net income earnings number portraying a less optimistic performance than a pro-forma number. Pro forma earnings can provide a more normalized representation to investors, which forecasts future performance without the unusual current expense. Items sometimes excluded in pro-forma earnings figures include write-downs, goodwill amortization, depreciation, restructuring and merger costs,
A. What type of opinion did the auditors issue on Google’s financial statements for 2007? What is the date of the audit opinion? Explain why the opinion date is different than the date of the financial statements.
Ernst & Young provides an unqualified opinion following their review of Google’s financial statements. They state that Google has performed effective internal control over their financial reporting, but they do go onto state that they changed their accounting methods in previous years as a note. The date of the audit, February 14th, is later than the issuance of the statements, January 31st, because the auditors must wait for the statements to be finalized before performing their review. It’s standard protocol for auditors to come out with their opinion 30-60 days following the closing of the books. It’s more common for fraud to occur towards the end of a fiscal year when goals/expectations need to be met so the auditors need to wait until the books are closed to begin their review.
B. Managers often report ‘pro-forma’ or ‘non-GAAP’ earnings as supplemental information when reporting their GAAP earnings.
i. What info can a pro-forma earnings number provide that the GAAP earnings number does not? Give examples of possible differences that might exist between the two earnings numbers.
The pro-forma number can provide a better baseline representation of the net income when unique, one-time, or unusual expenses are not figured into the calculation of the net income. Charge-offs, restructuring charges, changes in GAAP policies, etc will draw down the net income earnings number portraying a less optimistic performance than a pro-forma number. Pro forma earnings can provide a more normalized representation to investors, which forecasts future performance without the unusual current expense. Items sometimes excluded in pro-forma earnings figures include write-downs, goodwill amortization, depreciation, restructuring and merger costs,