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1 The Auditors Report

AUD 10

2 The Auditors Report

- PSA 700 (Revised), Forming an Opinion and Reporting on Financial Statements Effective on or
after December 15, 2016
- PSA 701, Communicating Key Audit Matters in the Independent Auditors Report
- PSA 705 (Revised), Modifications to the Opinion in the Independent Auditors Report
- PSA 706 (Revised), Emphasis of Matter Paragraphs and Other Mater Paragraphs in the
Independent Auditors Report
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3 Forming an Opinion on the Financial Statements

The auditor shall conclude as to whether the auditor has obtained reasonable assurance about
whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error.

4 Considerations in Forming an Opinion

The auditors conclusion, in accordance with PSA 330, whether sufficient appropriate audit
evidence has been obtained.
The auditors conclusion, in accordance with PSA 450, whether uncorrected misstatements are
material, individually or in aggregate; and
Evaluations mandated by PSA 700.

5 Evaluations to be Made by the Auditor
The FS adequately disclose the significant accounting policies selected and applied;
The accounting policies selected and applied are consistent with the applicable financial reporting
framework
Accounting estimates made by management are reasonable
The information presented in FS is relevant, reliable, comparable and understandable

6 Evaluations to be Made by the Auditor

The FS provide adequate disclosures to enable the users to understand the effect of material
transactions and events on the information conveyed in the FS;
The terminology used in the FS including the title of each FS, is appropriate.
Overall presentation, structure and content of FS
Whether FS including notes represent underlying transactions and events that achieve fair
presentation.

7 Basic Sections of Independent Auditors Report

8 Basic Sections of the Independent Auditors Report

The auditors report shall be in writing and shall have the following basic sections:
1.

9 Title
Independent Auditors Report

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Affirms that the auditor has met all of the relevant ethical requirements regarding independence
and, therefore, distinguishes the independent auditors report from reports issued by others

10 Addressee
The auditors report shall be addressed as required by the circumstances of the engagement.
Ordinarily, the audit report is addressed for whom the report is prepared (i.e. the shareholders or
those charged with governance).

11 Auditors Opinion
The first section of the audit report shall include the auditors opinion and
Identify the entity whose FS have been audited
State that the FS have been audited
Identify the title of each statement comprising the FS
Refer to the notes, including the summary of significant accounting polices
Specify the date of, or period covered by, each statement comprising the FS.

12 Auditors Opinion
For Unqualified Opinion on FS prepared in accordance with fair presentation framework, the
auditor uses the following phrase:
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as at December 31, 20X1, and its financial performance and its
cash flows for the year then ended in accordance with Philippine Financial Reporting Standards.

13 Basis for Opinion

This section shall directly follow the Opinion Section &
State that the audit was conducted in accordance with PSA;
Refer to the section of the auditors report that describes the auditors responsibilities under
the PSAs;
Include a statement that the auditor is independent of the entity;
State that the evidence obtained is sufficient & appropriate

14 Going Concern
The auditor shall evaluate whether sufficient appropriate evidence has been obtained regarding,
and shall conclude on, the appropriateness of managements use of the going concern basis of
accounting in the preparation of the financial statements.

15 Key Audit Matters (KAM)

Required for listed entities
The auditor communicate key audit matters in the auditors report in accordance with PSA 701
KAM are selected from matters which are communicated to TCWG & evaluated by auditor who
determines those matters which required significant auditor attention during the course of the
audit.

16 Key Audit Matters (KAM)

1. Areas susceptible to higher risks of material misstatements (Significant Risks)
2. Significant auditor judgments involving significant management judgments (Accounting
Estimates)
3. Effect on audit of significant events or transactions that have taken place during the period

17 Responsibilities of Management and TCWG

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Preparing the FS in accordance with the applicable financial reporting framework, & for such
internal control as management deems necessary to enable the preparation of FS that are free
from material misstatements, whether due to fraud or error;
Assessing the entitys ability to continue as a going concern and whether the use of going concern
basis of accounting is appropriate as well as disclosing, if applicable, matters relating to going
concern.

18 Auditors Responsibilities for the Audit of FS

Obtain reasonable assurance about whether the FS as a whole are free from material
misstatement whether due to fraud or error; and
Issue an auditors report that includes the auditors opinion.

19 Auditors Responsibilities for the Audit of FS

State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement when it exists.

20 Auditors Responsibilities for the Audit of FS

State that misstatements can arise from fraud or error, and either:
Describe that they are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements; or
Provide a definition or description of materiality in accordance with the applicable financial
reporting framework.

21 Auditors Responsibilities for the Audit of FS

State that, as part of an audit in accordance with ISAs, the auditor exercises professional judgment
and maintains professional skepticism throughout the audit;

22 Auditors Responsibilities for the Audit of FS

23 Auditors Responsibilities for the Audit of FS

24 Auditors Responsibilities for the Audit of FS

25 Auditors Responsibilities for the Audit of FS

26 Auditors Responsibilities for the Audit of FS

27 Auditors Responsibilities for the Audit of FS

The description of the auditors responsibilities for the audit of the financial statements required
by par. 3839 shall be included:
a) Within the body of the auditors report;
b) Within an appendix to the auditors report, in which case the auditors report shall include a
reference to the location of the appendix; or
c) By a specific reference within the auditors report to the location of such a description on a
website of an appropriate authority, where law, regulation or national auditing standards
expressly permit the auditor to do so.

28 Other Reporting Responsibilities

If the auditor addresses other reporting responsibilities in the auditors report on the financial
statements that are in addition to the auditors responsibilities under the PSAs, these other
reporting responsibilities shall be addressed in a separate section in the auditors report.

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reporting responsibilities shall be addressed in a separate section in the auditors report.

29 Name of the Engagement Partner
The name of the engagement partner shall be included in the auditors report of listed entities
unless, in rare circumstances, such disclosure is reasonably expected to lead to a significant
personal security threat.

30 Signature of the Auditor

The auditors report shall be signed.

In the Philippines, the BIR requires the auditors report to be manually signed.
31 Auditors Address

The auditors report shall name the location in the jurisdiction where the auditor practices.
32 Date of the Auditors Report
The auditors report shall be dated no earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence on which to base the auditors opinion on the financial
statements, including evidence that:
All the statements that comprise the financial statements, including the related notes, have
been prepared; and
Those with the recognized authority have asserted that they have taken responsibility for those
financial statements.

33 Forms of Audit Report

34 Unqualified Opinion
The auditor concludes that the FS are prepared, in all material respects in accordance with the
applicable financial reporting framework.

35 Modified Opinions

36 Additional Paragraphs to the Auditors Report

37 Emphasis of Matter Paragraph

The auditor does not modify his/her opinion
The matter has not been determined to be a key audit matter
Included within a separate section of the audit report
Include in the paragraph a clear reference to the matter being emphasized and to where relevant
disclosures it can be found in the FS
Indicate that the auditors opinion is not modified

38 Emphasis of Matter Paragraph

Situation where EOM may be necessary
Uncertainty relating to future outcome of exceptional litigation or regulatory action.
A significant subsequent event occurs between the date of the FS and the date of audit report.
Early application of new accounting standard (when permitted).
A major catastrophe that has had, or continues to have, a significant effect on entitys financial
position.

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39 Emphasis of Matter Paragraph

Situation where EOM may be required by other PSAs
When a financial reporting framework prescribed by law or regulation would be unacceptable;
To alert users that the FS are prepared in accordance with a special purpose framework;
When facts become known to auditor after the audit report & the auditor provides a new or
amended audit report

40 Other Matter Paragraph

Situation where OM may be necessary
Relevant to users understanding of the audit
Relevant to users understanding to the auditors responsibilities or the auditors report
Reporting on more than one set of financial statements
Restriction on distribution or use of the auditors report

41 Placement of EOM and OM in the Audit Report

42 Going Concern Considerations

If the auditor concludes that managements use of going concern is appropriate but a material
uncertainty exists, the auditor determine whether the FS:
Adequately disclose the principal events/conditions & plans to deal with these events or
conditions;
Disclose clearly that there is material uncertainty related to events & conditions that may cast
significant doubt on entitys ability to continue as going concern.

43 Going Concern Considerations

If the FS have been prepared using the going concern basis but the auditor believes that
managements use of the going concern basis is inappropriate, the auditor shall express an
adverse opinion.

44 Going Concern Considerations

If adequate disclosure about the material uncertainty is made in the FS, the auditor shall express
an unmodified opinion & include a separate section Material Uncertainty Related to Going
Concern to:
Draw attention to in the FS that discloses the matters stated above;
State that these events or conditions indicate that a material uncertainty exists that may cast
significant doubt on the entitys ability to continue as going concern & that the auditors
opinion is not modified in respect of the matter.

45 Going Concern Considerations

If adequate disclosure about the material uncertainty is not made in the FS, the auditor shall
Express a qualified or adverse opinion, as appropriate
In the Basis for Qualified or Adverse Opinion section, state that a material uncertainty exists
that may cast significant doubt on the entitys ability to continue as a going concern and that
the FS do not adequately disclose this matter.

46 Comparative Information
The amounts and disclosures included in the financial statements in respect of one or more prior
periods in accordance with the applicable financial reporting framework.

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periods in accordance with the applicable financial reporting framework.

47 Comparative Information

48 End of Discussion
QUESTIONS