CHAPTER-10
REPORTING
Reporting
The Independent Auditors Report
INT Syllabus
ISA 700
1. Title
2. Addressee
3. Auditor’s opinion
4. Basis of opinion
5. [ Meterial uncertainity] related to going concern] (If Applicable)
6. Listed Entities: Key audit matters.
7. [Emphasis on matter] (If applicable)
8. Other information
9. Responsibilities of management
10. Auditor’s responsibilities
11. Report on other legal and other regulatory requirements
12. [Other matter] (If applicable accordance with ISA 706)
13. Signature
14. Auditor’s Address
15. Date
Audit reporting – Auditors opinion
Nature of issue Not material Material but Material &
not pervasive pervasive
Misstatement Unmodified Modified Modified adverse
opinion qualified opinion opinion FS do not
True and fair except for… give a true and fair
view view
Inability to obtain Unmodified Modified Modified disclaimer
sufficient appropriate opinion qualified opinion of opinion
audit evidence True and fair except for … Do not express an
view opinion
ISA 700 allows the wording ‘true and fair view’ or ‘fairly presents.
Key Audit Matters Section
Key audit matters are those that in the auditor's professional judgment were of most
significance in the audit and are selected from matters communicated to those charged
with governance.
Key Audit Matters Include:
Areas of higher assessed risk of material misstatement, or significant risks
identified in accordance with ISA 315 (Revised 2019) Identifying and Assessing
the Risks of Material Misstatement.
Significant auditor judgments relating to areas in the financial statements that
involved significant management judgment, including accounting estimates that
have been identified as having high estimation uncertainty.
The effect on the audit of significant events or transactions that occurred during
the period.
Emphasis Of Matter Paragraph
An Emphasis of Matter paragraph is used to refer to a matter that has been
appropriately presented or disclosed in the financial statements by the directors. The
auditor's judgment is that these matters are of such fundamental importance to the
users' understanding of the financial statements that the auditor should emphasise the
disclosure. [ISA 706, 7a]
Examples of such fundamental matters include:
An uncertainty relating to the future outcome of exceptional litigation or
regulatory action.
A significant subsequent event occurs between the date of the financial
statements and the date of the auditor's report.
Early application of a new accounting standard.
Major catastrophes that have had a significant effect on the entity’s financial
position.
Other Information Section
Other information refers to financial or non-financial information, other than the
financial statements and auditor's report thereon, included in the entity's annual report.
[ISA 720 (Revised) The Auditor's Responsibilities Relating to Other Information, 12c]
Examples of other information include:
Chair's report
Operating and financial review Social and environmental reports
Corporate governance statements.
Responsibilities Of Management And Auditors
The responsibilities of management and auditors are included to help minimize the
expectation gap.
The section on management responsibilities clarifies that management is responsible
for preparing the financial statements and for the internal controls.
The section on auditor’s responsibilities clarifies that the auditor is responsible for
expressing reasonable assurance as to whether the financial statements give a true and
fair view and express that opinion in the auditor's report.
The section also describes the auditor's responsibilities in respect of risk assessment,
internal controls, going concern and accounting policies.
Other Matter Paragraph
An Other Matter paragraph is included in the auditor's report if the auditor considers it
necessary to communicate to the users regarding matters other than those presented or
disclosed in the financial statements that, in the auditor's judgment, are relevant to
understanding the audit, the auditor's responsibilities, or the auditor's report.
Examples of its use include:
To communicate that the auditor's report is intended solely for the intended
users and should not be distributed to or used by other parties. [ISA 706, A14]
When law, regulation or generally accepted practice requires or permits the
auditor to provide further explanation of their responsibilities.
Signature, auditor’s address and date
The signature identifies the audit firm responsible
for the auditor’s report and opinion. If the company
is a listed company, the report would include the
name of the engagement partner.
The auditor’s address identifies the specific office of
the engagement partner responsible for the report in case of any queries.
The date identifies the date up to which the audit work
has been performed. Any information that comes to
light after this date will not have been considered by
the auditor when forming their opinion.
The report must be signed and dated after the date.
the directors approved the financial statements. Often,
the financial statements are approved and the
auditor's report signed on the same day.
Communicating With Those Charged With Governance
The persons with responsibility for overseeing the strategic direction of the entity and
obligations related to the accountability of the entity.
This includes the directors (executive and non-executive) and the audit committee.
One of the areas of difficulty is that there is assumed to be a distinction between
management and those charged with governance. For small and medium-sized entities
and particularly for owner-managed businesses, this is often not the case.
Reasons For Communicating To Those Charged With Governance
To communicate responsibilities of the auditor and an overview of the scope
and timing of the audit.
To obtain information relevant to the audit.
To report matters from the audit on a timely basis.
To promote effective two-way communication.
Matters To Be Communicated To TCWG
Delays in obtaining information for the audit.
An unreasonably brief time within which to complete the audit.
Expected limitations on the audit, either imposed by management or other
circumstances.
The potential effect on the financial statements of any material risks and
exposures, such as pending litigation, that are required to be disclosed in the
financial statements.
A summary of identified misstatements, whether corrected or not by the entity
and a request that they are adjusted.
Material uncertainties related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern.
Any other matters agreed upon in the terms of the audit engagement.