Lecture Auditing and assurance services (Second international edition) Chapter 18 Reports on audited financial statements

Chapter Eighteen

Reports on
Audited Financial
Statements

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Audit Report with an Unmodified Opinion
The
Theaudit
auditreport
reportwith
withan
anunmodified
unmodifiedopinion
opinionis
isissued
issued
when
whenthe
thefinancial
financialstatements
statementsconform
conformto
tothe
the
applicable
applicablefinancial
financialreporting

reportingframework.
framework.
Nine
NineElements
Elements
1.1. Report
Reporttitle
title
2.2. Addressee
Addressee
3.3.
4.4.

Introductory
Introductoryparagraph
paragraph
Management’s
Management’sresponsibility
responsibility

5.5.
6.6.

Auditor’s
Auditor’sresponsibility
responsibility
Auditor’s
Auditor’sopinion
opinion

7.7.
8.8.

Auditor’s
Auditor’ssignature
signature
Audit
Auditreport
reportdate
date

9.9. Auditor’s
Auditor’saddress
address
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Audit Report with an Unmodified Opinion

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Emphasis of Matter Paragraph and Other
Matter Paragraph
An emphasis of matter
paragraph does not
affect the auditor’s
opinion
because it can only be
included in the audit

report if the matter is
appropriately presented
or disclosed in the
financial statements.

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An other matter
paragraph does not
affect the auditor’s
opinion
because it relates to a
matter other than those
required to be presented
or disclosed in the
financial statements.


Emphasis of Matter Paragraph
AAmatter,
matter,although
althoughappropriately
appropriatelypresented
presentedor
ordisclosed
disclosedinin
the
thefinancial
financialstatements,
statements,that

thatisisof
ofsuch
suchimportance
importancethat
thatititisis
fundamental
fundamentalto
tousers’
users’understanding
understandingof
ofthe
thefinancial
financial
statements
statements
•• The
Theemphasis
emphasisof
ofmatter
matterparagraph
paragraphisisincluded
includedimmediately
immediately
after
afterthe
theopinion
opinionparagraph
paragraphininthe
theaudit
auditreport

reportand
andthe
theheading
heading
‘Emphasis
‘Emphasisof
ofMatter’
Matter’isisordinarily
ordinarilyused.
used.
•• The
Theparagraph
paragraphincludes
includesaaclear
clearreference
referenceto
tothe
thematter
matterbeing
being
emphasized
emphasizedand
andto
towhere
whererelevant
relevantdisclosures
disclosuresthat
thatfully
fully
describe

describethe
thematter
mattercan
canbe
befound
foundininthe
thefinancial
financialstatements.
statements.
•• The
Theauditor
auditorshould
shouldindicate
indicatethat
thatthe
theauditor’s
auditor’sopinion
opinionisisnot
not
modified
modifiedininrespect
respectof
ofthe
thematter
matteremphasized.
emphasized.
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Emphasis of Matter Paragraph for

Going-Concern Problems

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Emphasis of Matter Paragraph
An
An emphasis
emphasis of
of matter
matter paragraph
paragraph isis used
used only
only ifif
the
the matter
matter isis of
of such
such importance
importance that
that itit isis
fundamental
fundamental to
to users’
users’understanding
understanding of
of the
the
financial
financial statements.

statements.
Auditing
Auditingstandards
standardsgive
givethese
theseexamples:
examples:
••An
Anuncertainty
uncertaintyrelating
relatingto
tothe
thefuture
futureoutcome
outcomeof
of
exceptional
exceptionallitigation
litigationor
orregulatory
regulatoryaction.
action.
••Early
Earlyapplication
application(where
(wherepermitted)
permitted)of
ofaanew
newaccounting
accounting

standard
standardthat
thathas
hasaapervasive
pervasiveeffect
effecton
onthe
thefinancial
financial
statements
statementsin
inadvance
advanceof
ofits
itseffective
effectivedate.
date.
••AAmajor
majorcatastrophe
catastrophethat
thathas
hashad,
had,or
orcontinues
continuesto
tohave,
have,
aasignificant
significanteffect
effecton

onthe
theentity’s
entity’sfinancial
financialposition.
position.
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Other Matter Paragraph
•• The
Theterm
term‘other
‘othermatter’
matter’isisused
usedbecause
becausethe
thematter
matter
communicated
communicatedisisaamatter
matterother
otherthan
thanthose
thosethat
thatare
are
presented
presentedor
ordisclosed
disclosedin

inthe
thefinancial
financialstatements.
statements.
•• The
Theother
othermatter
mattermust
mustrelate
relateto
tothe
theunderstanding
understandingof
of
the
theaudit,
audit,the
theauditor’s
auditor’sresponsibilities
responsibilitiesor
orthe
theauditor’s
auditor’s
report.
report.
•• An
Another
othermatter
matterparagraph
paragraphisisheaded

headed‘Other
‘OtherMatter’
Matter’
and
andthe
theparagraph
paragraphisisincluded
includedin
inthe
theaudit
auditreport
report
immediately
immediatelyafter
afterthe
theopinion
opinionparagraph
paragraphand
andany
any
emphasis
emphasisof
ofmatter
matter paragraph.
paragraph.
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Other Matter Paragraph

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Conditions of Modification

Scope
Limitation

Departure from
the
Applicable
Financial
Reporting
Framework
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Auditor’s inability to obtain
sufficient appropriate
evidence

The financial statements are
prepared or presented in a
manner that conflicts with the
applicable financial reporting
framework


Audit Reports with Modified Opinion

Qualified

‘except for’

Disclaimer
Adverse

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Effect of Materiality and Pervasiveness

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Scope Limitation –
Disclaimer of Opinion

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Scope Limitation –
Qualified Opinion

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Departure from Applicable Financial
Reporting Framework – Qualified Opinion

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Departure from Applicable Financial
Reporting Framework– Adverse Opinion

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Special Reporting Issues
Reports on
comparative
information.
Other
information in
documents
containing
audited financial
statements.

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Reports on
specialized
areas.


Reports on Comparative Financial
Information
Corresponding
Correspondingfigures
figures are

arecomparative
comparative
information
informationwhere
whereamounts
amounts and
and other
other
disclosures
disclosures for
forthe
the prior
priorperiods
periodsare
arean
anintegral
integral
part
partof
ofthe
thecurrent-period
current-period financial
financialstatements,
statements,
and
andare
areintended
intendedto
tobe
beread

read only
only in
inrelation
relationto
to
current-period
current-periodfigures.
figures.
Comparative
Comparativefinancial
financialstatements
statements are
areconsidered
considered
separate
separatefinancial
financialstatements
statementsand
and are
are included
included
for
forcomparison
comparisonwith
withthe
thefinancial
financialstatements
statements of
of
the

thecurrent
currentperiod.
period.

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Corresponding Figures –
Audit Report with a Qualified Opinion

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Comparative Financial Statements –
Audit Report with an Unmodified Opinion

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Other Information in Documents
Containing Audited Financial Statements
The auditor has no responsibility beyond the
financial information contained in the report,
and he or she has no obligation to perform any
audit procedures to corroborate the other
information. However, the auditor is required to
read the other information and consider whether
it is consistent with the information contained in
the audited financial statements.
Annual

Reports
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Report on a Material Inconsistency

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Reporting on Specialized Areas
Reporting on
financial statements
prepared in
accordance with a
special purpose
framework.

Reporting on single
financial
statements or
elements of a
financial statement.

Reporting on
summary financial
statements.

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Special Purpose Frameworks
Tax Basis

Cash Basis

Regulatory Basis

Contract Basis

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Audit Report on Financial Statements
prepared on a Tax Basis

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