AUDITORS REPORT

(PSA 705)

://KBG

Classified - Internal use

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

TYPES OF AUDITORS OPINION

UNMODIFIED: No Material Misstatements PLUS Sufficient
Appropriate Audit Evidence (SAAE).
Unqualified
Unqualified with Emphasis of Matter Paragraph or Other Paragraph

MODIFIED: Material Misstatements OR No SAAE.

Qualified
Adverse
Disclaimer
://KBG

Classified - Internal use

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

EMPHASIS OF MATTER PARAGRAPH

(PSA 706)

A paragraph included in the auditors report that refers to a

matter appropriately presented or disclosed in the financial
statements that, in the auditors judgment, is of such importance
that it is fundamental to users understanding of the financial
statements.

://KBG

Classified - Internal use

When the auditor includes an Emphasis of Matter

paragraph in the auditors report, the auditor shall:
a) Include it immediately after the Opinion paragraph in the
auditors report;
b) Use the heading Emphasis of Matter, or other appropriate
heading;
c) Include in the paragraph a clear reference to the matter being
emphasized and to where relevant disclosures that fully
describe the matter can be found in the financial statements;
and
d) Indicate that the auditors opinion is not modified in respect
of the matter emphasized.
://KBG

Classified - Internal use

Illustration of an Auditors Report that Includes an

Emphasis of Matter Paragraph
Audit of a complete set of general purpose financial statements prepared
by management of the entity in accordance with Philippine Financial
Reporting Standards.
The terms of the audit engagement reflect the description of managements
responsibility for the financial statements in [proposed] PSA 210
(Redrafted).
There is uncertainty relating to a pending exceptional litigation matter.
A departure from the applicable financial reporting framework resulted in
a qualified opinion.
In addition to the audit of the financial statements, the auditor has other
reporting responsibilities required under local law.
://KBG

Classified - Internal use

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

OTHER MATTER PARAGRAPH

(PSA 706)

A paragraph included in the auditors report that refers to a

matter other than those presented or disclosed in the financial
statements that, in the auditors judgment, is relevant to users
understanding of the audit, the auditors responsibilities or the
auditors report.

://KBG

Classified - Internal use

The auditor shall include this paragraph:

a. Immediately after the Opinion paragraph and any Emphasis
of Matter paragraph, or
b. elsewhere in the auditors report if the content of the Other
Matter paragraph is relevant to the Other Reporting
Responsibilities section.

://KBG

Classified - Internal use

10

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

11

MODIFIED AUDITORS OPINION

Nature of Matter

Material but Not

Pervasive

Material and
Pervasive

Financial statements are

materially misstated
Inability to obtain SAAE:

Qualified

Adverse Opinion

Qualified
Qualified

Resign, if appropriate or
Disclaimer of opinion
Disclaimer of opinion

N/A

Disclaimer of opinion

Due to mgt. imposed

limitation
Other limitations
Multiple uncertainties
even with SAAE (rare)

://KBG

Classified - Internal use

12

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

13

MODIFIED AUDITORS REPORT

Description of Introductory Paragraph
Qualified or Adverse Opinion
We have audited the accompanying financial statements of ABC Company

Disclaimer of Opinion
We were engaged to audit the accompanying financial statements of ABC
Company

://KBG

Classified - Internal use

14

MODIFIED AUDITORS REPORT

Description of Auditors Responsibility Paragraph
Qualified or Adverse Opinion
state that the auditor believes that the audit evidence the auditor has obtained
is sufficient and appropriate to provide a basis for the auditors modified audit
opinion.

Disclaimer of Opinion
Our responsibility is to express an opinion on the financial statements based on
conducting the audit in accordance with PSAs. Because of the matter(s) described
in the Basis for Disclaimer of Opinion paragraph, however, we were not able to
obtain SAAE to provide a basis for an audit opinion.
://KBG

Classified - Internal use

15

MODIFIED AUDITORS REPORT

Basis for Modification Paragraph
Immediately before the opinion paragraph in the auditors report and
use the heading Basis for Qualified Opinion, Basis for Adverse
Opinion, or Basis for Disclaimer of Opinion, as appropriate.

Opinion Paragraph
Qualified Opinion except for
Adverse do not present fairly
Disclaimer of Opinion auditor does not express an opinion
://KBG

Classified - Internal use

16

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

17

GOING CONCERN CONSIDERATIONS

(PSA 570)

An entity is viewed as continuing in business for the foreseeable future.

General purpose financial statements are prepared on a going concern
basis, unless management either intends to liquidate the entity or to cease
operations, or has no realistic alternative but to do so.
Special purpose financial statements may or may not be prepared in
accordance with a financial reporting framework for which the going
concern basis is relevant (e.g., the going concern basis is not relevant for
some financial statements prepared on a tax basis in particular
jurisdictions).
://KBG

Classified - Internal use

18

Start
Has
management
made an
assessment
and covered
the
appropriate
period?

Evaluate
managements
assessment

Identify

Agree
A

Manageme
nt
agree/refus
e?

Refuse
Qualified
or
Disclaimer
://KBG

Material
uncertainty

Yes

No

No
Request
management to
make or extend
assessment

Is there events or
conditions that
may cast
significant doubt
on the entitys
ability to continue
as going concern?

Going
concern
assumptio
n
appropriate
?

No

If no other audit evidence obtained during

the audit that suggests otherwise, going
concern assumption can be concluded to be
appropriate

Yes
FS
prepared
by
manageme
nt based
on going
concern?

No
Multiple material
uncertainties that are
significant to FS

Disclaimer
(Rare)

Yes

Yes

Adequate
disclosure
in FS?

No
EOM
(May)

Classified - Internal use

Yes

No
Adverse

Qualified or
Adverse

EOM

19

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

20

CONSIDERATION OF LAWS AND REGULATION

Results

Opinion

No SAAE as precluded by
management or TCWG
No SAAE imposed by
circumstances
Contains material misstatement

://KBG

Qualified or Disclaimer
Evaluate effect on audit report

Classified - Internal use

Qualified or Adverse

21

TABLE OF CONTENTS

Types of Auditors Opinion

Emphasis of Matter Paragraph
Other Matter Paragraph
Modified Auditors Opinion
Modified Auditors Report
Going Concern Considerations
Consideration of Laws and Regulation
Auditors Reports Involving Component Auditors of Group

://KBG

Classified - Internal use

22

AUDITORS REPORTS INVOLVING COMPONENT

AUDITORS OF GROUP
(PSA 600)

The principal auditor has three alternatives:

Make no reference in the audit report
Standard unqualified opinion
Immaterial components

Make reference in the report

Shared opinion or report
Modify intro., scope and opinion paragraphs

Modify the opinion

Principal auditor is not willing to assume any responsibility for the work of the
other auditor
If other auditor modified his or her opinion
://KBG

Classified - Internal use

23

QUESTIONS?

://KBG

Classified - Internal use

24