The Auditors Report on Financial Statements Effective for all audits commencing on or after 01 January 2010 15 October 2012 2 Introduction SLAUS 700 The auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinionon the financial statements. Financial Statements Prepared in accordance with an acceptable financial reporting framework i.e. SLAS or relevant other standards or practices Financial Statements comply with Statutory requirements The auditors report should contain a clear written expression of opinion on the financial statements as a whole 3 SLAUS 700 Basic Elements of the Auditors Report SLAUS 700 TheAuditReport The Auditors Report The auditors report should contain a clear written expression of opinion on the financial statements as a whole Anexample 4 SLAUS 700 The Auditors Report The auditors report should contain a clear written expression of opinion on the financial statements as a whole SLAUS 700 The Auditors Report The auditors report should contain a clear written expression of opinion on the financial statements as a whole 5 SLAUS 700 The Auditors Report The auditors report should contain a clear written expression of opinion on the financial statements as a whole IntroductoryPara contd. SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Unlessotherwisestatedtheauditingstandardsor practicesfollowedarepresumedtobethoseof thecountryindicatedbytheauditorsaddress. 6 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Unqualified opinion Indicated implicitly that any changes in accounting principles or the method of their application, and the effects thereof, have been properly determined and disclosed in the financial statements. SLAUS 700 7 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Auditcompletion datesameasthe management approvaldate Address AuditorsSignature SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole ModifiedReports Mattersthatdonotaffecttheauditors opinion Emphasisofmatter Mattersthatdoaffecttheauditorsopinion Qualifiedopinion Disclaimerofopinion Adverseopinion 8 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Emphasisofmatter Presented After theopinionpara. Used to highlightamatteraffectingthefinancialstatementsthatismoreextensively discussesthemattersinanote. When Significantuncertaintytheresolutionofwhichisdependentuponfutureevents materialmatterregardingGoingconcern Mattersotherthanthoseaffectingfinancials E.g.amendmenttoanotherinformationinadocumentandentityrefusestomake theamendment SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole MattersthatDoaffecttheAuditors Opinion Materialmatter Limitationonthescopeofthe auditorswork Disagreementwithmanagementre acceptabilityoftheaccountingpolicies selected andthemethodoftheirapplication ortheadequacyofdisclosures Qualified opinion Disclaimer opinion Qualified opinion Adverse opinion 9 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Qualified opinion Auditorconcludesthatan unqualifiedopinioncannotbe expressedbutthattheeffect notsomaterialandpervasive astorequireanadverseor disclaimerofopinion. Expressedasbeingexceptfor theeffectsofthematter Acleardescriptionofallthe substantivereasonsshould beincludedinthereport andunlessimpracticable,a quantificationofthe possibleeffect(s)onthe financialstatements precedingtheopinion.(if disclaimerreferencetoa moreextensivediscussion SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Disclaimer opinion Limitationofscopeisso materialandpervasivethatthe auditorhasnotbeenableto obtainsufficientappropriate auditevidenceandaccordingly unabletoexpressanopinion. Significantmultiple uncertainties Acleardescriptionofallthe substantivereasonsshouldbe includedinthereportand unlessimpracticable,a quantificationofthepossible effect(s)onthefinancial statements precedingthe opinion.(ifdisclaimer referencetoamoreextensive discussion 10 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Adverse opinion Effectofadisagreementisso materialandpervasivethatthe auditorconcludesthatthe qualificationoftheauditreport isnotadequatetodisclosethe misleadingorincompletenature ofthefinancialstatements. Acleardescriptionofallthe substantivereasonsshouldbe includedinthereportand unlessimpracticable,a quantificationofthepossible effect(s)onthefinancial statements precedingthe opinion.(ifdisclaimer referencetoamoreextensive discussion SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Limitation ofscope Imposedbytheentity Iftheauditorbelievesthatthe termsoftheproposed engagementresultsina disclaimeropinionAUDITOR ordinarilyNOTACCEPTsuchan engagement. Imposedbycircumstance e.g.timingoftheauditors appointmentissuchthatthe auditorisunabletoobserve inventorycount ORaccoutning recordsare inadequate(attemptalternative procedures) Auditorshoulddescribethe limitation. 11 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Exceptasdiscussedinafollowingparagraph,wehaveobtained alltheinformationandexplanationswhichtothebestof ourknowledgeandbeliefwerenecessaryforthepurposes ofouraudit.Wethereforebelievethatourauditprovidesa reasonablebasisforourqualifiedopinion. Wedidnotobservethecountingofthephysicalinventoriesasof March31,20X9,sincethatdatewaspriortothetimewe wereinitiallyengagedasauditorsfortheCompany.Owingto thenatureoftheCompanysrecords,wewereunableto satisfyourselvesastoinventoryquantitiesbyotheraudit procedures. Inouropinion,sofarasappearsfromourexamination,exceptfor theeffectsofsuchadjustments,ifany,asmighthavebeen determinedtobenecessaryhadwebeenabletosatisfy ourselvesastophysicalinventoryquantities,theCompany maintainedproperaccountingrecordsfortheyearended March31,20X9andthefinancialstatementsgiveatrueand ...(remainingwordsarethesameasillustratedintheopinion paragraph paragraph28above). Limitation ofscope Qualified opinion SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole (Omitthesentencestatingtheresponsibilityoftheauditor). (Theparagraphsdiscussingthescopeoftheauditandbasisof opinionwouldeitherbeomittedoramendedaccordingto thecircumstances.) Wehavenotobtainedadequateinformationandexplanationsas discussedinthefollowingparagraph,forthepurposesofour audit.Wethereforebelievethatourauditprovidesa reasonablebasisforourdisclaimerofopinion. (Addaparagraphdiscussingthescopelimitationasfollows:) Wewerenotabletoobserveallphysicalinventoriesandconfirm accountsreceivableduetolimitationsplacedonthescopeof ourworkbytheCompany. Becauseofthesignificanceofthemattersdiscussedinthe precedingparagraph,wedonotexpressanopiniononthe financialstatementsofthecompany. Limitation ofscope Disclaimer opinion 12 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole Acceptabilityofaccounting policies Method Adequacyofdisclosures Auditorshoulddescribethe limitation. Disagreement SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole AsdiscussedinNoteXtothefinancialstatements,no depreciationhasbeenprovidedinthefinancial statementswhichpractice,inouropinion,isnotin accordancewithSriLankaAccountingStandards.The provisionfortheyearendedMarch31,20X9,shouldbe xxxbasedonthestraightlinemethodofdepreciation usingannualratesof5%forthebuildingand20%for theequipment.Accordingly,thefixedassetsshouldbe reducedbyaccumulateddepreciationofxxxandthe lossfortheyearandaccumulateddeficitshouldbe increasedbyxxxandxxx,respectively. Inouropinion,sofarasappearsfromourexamination, exceptfortheeffectonthefinancialstatementsofthe matterreferredtointheprecedingparagraph,the Companymaintainedproperaccountingrecordsfor theyearendedMarch31,20X9andthefinancial statementsgiveatrueand...(remainingwordsarethe sameasillustratedintheopinionparagraph paragraph28above). Qualified opinion Disagreement 13 SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole OnJanuary15,20X9,theCompanyissueddebentures intheamountofxxxforthepurposeoffinancing plantexpansion.Thedebentureagreement restrictsthepaymentoffuturecashdividendsto earningsafterMarch31,20X3.Inouropinion, disclosureofthisinformationisrequiredby... Inouropinion,sofarasappearsfromour examination,exceptfortheomissionofthe informationincludedintheprecedingparagraph, theCompanymaintainedproperaccounting recordsfortheyearendedMarch31,20X9and thefinancialstatementsgiveatrueand... (remainingwordsarethesameasillustratedin theopinionparagraph paragraph28above). Refertotherelevantstatuteorlaw. Qualified opinion Disagreement disclosure SLAUS 700 The auditors report should contain a clear written expression of opinion on the financial statements as a whole (Paragraph(s)discussingthe disagreement). Inouropinion,sofarasappearsfrom ourexamination,becauseofthe effectsofthemattersdiscussedin theprecedingparagraph(s),the financialstatementsdonotgivea trueandfairviewoftheCompanys stateofaffairsasatMarch31,20X9 anditsprofitandcashflowsforthe yearthenendedinaccordancewith SriLankaAccountingStandards. Disagreement disclosure Adverse opinion 14 Thank you.