Professional Documents
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Title Addressee Introductory Paragraph Managements Responsibility Auditors Responsibility Auditors Opinion Auditors Signature Date Auditors Address
designing, implementing and maintaining internal control selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
The auditors report should state that the financial statements are presented fairly in all material respects in accordance with the applicable financial reporting framework.
The report should name a specific location where the auditor maintains his office.
PSA 701
The auditor may disagree with management about certain matters such as the acceptability of accounting policies selected, the method of their application, or the adequacy of disclosures in the financial statements. If such disagreements are significant to the financial statements, the auditor should express a qualified or an adverse opinion.
Scope limitations
Scope limitations arise when the auditor is unable to perform necessary audit procedures or the auditor is unable to gather sufficient appropriate evidence about an assertion. A limitation on the scope of the auditors work may be imposed by the entity or imposed by circumstances. A scope limitation will result to either qualified or a disclaimer of an opinion
Materiality consideration
Materiality and pervasiveness (large-scale) of effect on financial statements determine the opinion to be expressed.
Whenever the auditor expresses an opinion that is other than unqualified, a clear description of all the substantive reasons should be included in the report and, unless impracticable, a quantification of the possible effect(s) on the financial statements.
GAAP Violation
Scope Limitations
Material
Material
Qualified Opinion
Adverse Opinion
Qualified Opinion
Disclaimer of Opinion
Going Concern
Uncertainty
An uncertainty is a matter whose outcome depends on future actions or events not under the direct control of the entity but that may affect the financial statements. When there are significant uncertainties that are adequately accounted for and disclosed in the notes to the financial statements, the auditor should consider modifying the report by adding a paragraph to the unqualified report to emphasize the material uncertainty.
The auditor should evaluate information gathered during the audit to determine whether there is substantial doubt about the entitys ability to continue as a going concern. If there is a significant doubt about entitys ability to continue as a going concern for a reasonable period of time, the auditor should consider whether the going concern problems are adequately disclosed in the notes to financial statements.
Adequately describe the principal conditions and events that give rise to the significant doubt including management plans to deal with these events or conditions. State clearly that there is a material uncertainty about the entitys ability to continue as a going concern and that the entity may not be able to realize its assets or discharge its liabilities in the normal course of business.
In extreme cases, such as situations involving multiple uncertainties that are significant to the financial statements, the auditor may consider it appropriate to issue a disclaimer of opinion instead of adding an emphasis of a matter paragraph.
Management may judge it necessary to depart from financial reporting standards in order to come up with a fair presentation of financial statements. If the reasons are adequately disclosed and the auditor believes that such a departure is justified the auditor should express an unqualified opinion and disclose the departure in a separate paragraph of the report.
Qualified
Qualified
Adverse
Disclaimer
1. Uncertainties
2. Going Concern Uncertainties 3. Justifiable PFRS departure
COMPARATIVES
PSA 710
Comparative financial statements where amounts and other disclosures for the preceding period are
included for comparison with the financial statements of the current period, do not form part of the current period financial statements
2.
3.
Prior Period Financial Statements were audited by a continuing auditor Prior Period Financial Statements were audited by another auditor Prior Period Financial Statements were not audited
PSA 720
The auditors responsibility does not extend beyond the financial statements identified in the Report. The auditor has no responsibility to corroborate the other information The auditor should read the other information
Material Inconsistency
Other information materially inconsistent with audited financial statements ( other information is correct ) Other information materially inconsistent with audited financial statements (financial statements are correct )
PSA 800
PSA 800 has defined special purpose audit reports as those reports issued in connection with the independent audit of financial statements other than the auditors report on financial statements, including:
1.
2. 3. 4.
Financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP; Specified accounts, elements of accounts, or items in a financial statement; Compliance with contractual agreements; and Summarized financial statements.
Reports on financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP.
Auditor may sometimes be engaged to report on financial statements that are prepared using other comprehensive basis of accounting. A comprehensive basis of accounting other than GAAP comprises a set of criteria used in preparing financial statements which applies to all material items and which has substantial support.
The auditor may sometimes be requested to express an opinion on one or more components of financial statements. Since this type of engagement does not result to an expression of an opinion on financial statements taken as a whole, the auditors opinion should be confined only to the specific account or element of a financial statement identified in the report.
The auditor may be requested to report on summarized financial statements which highlight the entitys financial position and results of operations. This type of engagement may be accepted provided the auditor expressed an audit opinion on the financial statements from which the summarized financial statements were derived
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