AUDIT REPORT BY- CANOTESCOMMUNITY

TOPICS COVERED
SA-700 – Forming an Opinion & reporting of financial statement
SA-701- Communicating key matters
SA-705 – Modification of Opinion
SA-706 – emphasis of matter paragraphs and other matter paragraphs
SA-710 – Comparative information
SA-705: MODIFICATION OF OPINION
Audit Report 1. Unmodified Report
2. Modified Report (Qualified opinion, Adverse opinion, Disclamer of opinion)
WHEN A MODIFICATION • The auditor concludes based on audit evidence obtained-That the financial statement
TO THE AUDITOR'S as a whole are not free from material misstatement.
OPINION IS REQUIRED • The auditor is unable to obtain sufficient appropriate audit evidence to conclude that
the financial statement as a whole are free from material mis-statement.
OBJECTIVE OF THE To Express clearly an appropriately modified opinion on the financial statement that is
AUDITOR necessary when:
(A) The auditor concludes, based on the audit evidence obtained, that the financial
statements as a whole are not free form material misstatement.
(B) The auditor is unable to obtain sufficient appropriate audit evidence to conclude that
the financial statements as a whole are free form material misstatement.
When to give Modified 1. Obtained sufficient & Appropriate Audit Evidence concludes Financial Statement are
Opinion? materially Mis-stated
a. Material but not pervasive -Qualified Opinion
b. Material & pervasive- Adverse Opinion
2. Unable to obtain sufficient & appropriate audit evidence
a. Due to limitation imposed by management, Request management to remove the
limitation
i. Management removes the limitation – proceed with audit procedure
ii. Management refuses to remove the limitation- Communicate to TCWG+
alternate Audit Procedures
Still unable to obtain sufficient appropriate audit evidence
• Material but not pervasive -Qualified Opinion
• Material & pervasive- Withdraw/Disclamer of Opinion
b. Other reasons [undetected mis-statement]
i. Material but not pervasive -Qualified Opinion
ii. Material & pervasive- Disclamer of Opinion
Which type of opinion is (A). The nature of the matter giving rise to the modification:
Appropriate? DEPENDS i) That is whether the FS are materially misstated or
UPON ii) In case of an inability to obtain sufficient appropriate audit evidence may be materially
misstated.
(B) The Auditor's Judgment:
About the pervasiveness of the effects or possible effects of the matter on the financial
statements.
SA-706 – Emphasis of Matter paragraphs and other Matter paragraphs
Emphasis of Matter A Paragraph include in the Auditor's Report that refers to matter appropriately presented/
Paragraph (EMP) disclosed in F.S. that in the Auditor's Judgement, is such importance that it is fundamental to
user's understanding of F.S.
Other Matter Paragraph A Paragraph include in the Auditor's Report that refers to matter other than those presented/
(OMP) disclosed in F.S. that in the Auditor's Judgement, is relevant to user's understanding of audit,
auditor's responsibilities or auditor's report.
Emphasis of matter 1. Would not be required to modify the opinion in accordance with SA-705 as a result of
paragraph in auditor’s matter.
report provided 2. The matter has not been determined to be key audit matter as per SA-701.
When the Auditor • Include the paragraph Within a separate section in the Auditor's Report With
includes an Emphasis of appropriate heading "Emphasis of Matter".

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Matter Paragraph in the • Include in the paragraph a clear reference to the matter being emphasized
Auditor’s Report, the &
auditor shall • To where relevant disclosures that fully describe the matter can be found in F.S. (only
to information presented/disclosed in FS).
• Indicate that the auditor's opinion is not modified in respect of the matter.
Emphasis Of Matter • Disclosures in the Financial Statement
Paragraph is not • Reporting in accordance with SA 570 (Going Concern)
substitute for • A modified opinion in accordance with SA 705
Circumstances where Examples
the auditor may 1. An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
consider it necessary to 2. Significant subsequent event that occurs between the date of FS and the date of auditor's
include an Emphasis of report.
Matter Paragraph 3. Early application of new accounting standards that has a material effect on the FS.
4. Major catastrophe that has had or continue to have significant effect on the entity's financial
position.
Other Matter paragraph 1. Not prohibited by law or regulation
in auditor’s report 2. Not determined to be key audit matter as per SA-701
provided The auditor shall include the paragraph within a separate section with heading other matter in
the Audit Report.
Communication with 1. Regarding the expectations
TCWG 2. Wordings of paragraph
SA-701- Communicating key matters in Auditor’s Report
Definition of Key Audit Key Audit Matters are those matters that in the auditor's professional judgement were of most
Matter significant in the audit of financial statement of current period.
Objectives of Auditor 1. Determine key audit matters
2. Communicate those matters in the auditor's report
Determine key audit 1. Area of higher assessed risk of material misstatement
matters or
Significant risks identified in accordance with SA 315
2. Significant auditor judgements relating to areas in the FS that involved significant
management judgment including accounting estimate that have been identified as having
high estimation uncertainty.
3. The effect on the audit of significant events or transactions that occurred during the period
COMMUNICATING KEY The auditor shall describe each key audit matter by using an appropriate subheading in a
AUDIT MATTERS separate section of the auditor's report under heading "Key Audit Matter"
The introductory language in this section of the auditor's report shall state that
1. Key audit matters are those matters that, in the auditor's professional judgement, were
of most significant in the audit of the FS.
2. These matters were addressed in the context of the audit of FS as a whole and in
forming the auditor's opinion thereon.
And
The auditor does not provide a separate opinion on these matters.
Communicating Key 1. Disclosure in the financial statement
Audit Matter is not 2. The Auditor expressing modified opinion in accordance with SA-705
substitute for 3. Reporting in accordance with SA-570[GOING CONCERN]
4. Separate opinion on individual matters
Communication with 1. Those matters that Auditor determine to be key audit matters
TCWG 2. If applicable, the auditor's determination that there are no key audit matter to
communicate in the auditor's report.

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SA-700 – Forming an Opinion & reporting of financial statement

Basic elements of Audit Report
1. Tittle Indicates that it is Audit Report of an Independent Auditor
2. addressee Shall be addressed as required by the circumstances of engagement
a. Applicable law & Regulation may specify
b. Normally addressed to those from whom Audit Report is prepared
Shareholder/TCWG
3. Auditor’s opinion Opinion Section of the Auditor's Report shall also cover the following:
Heading opinion • Identify the entity whose FS have been audited.
• State that Financial Statements have been audited.
• Identify title of each statement that comprises FS
• Reference to the summary of significant accounting policies
• Specify date period covered by each FS.
4. Basis for opinion The auditor's report shall include a section directly following the Opinion Section with
heading "Basis for Opinion"
(a) States that the audit was conducted in accordance with Standards on Auditing
(b)Refers to the section of the auditor's report that describes the Auditor's responsibilities
under the SAS;
(c) Includes a Statement that the auditor is independent of the entity in accordance with the
relevant ethical responsibilities in accordance with these requirements.
(d)State whether the auditor believes that the audit evidence that auditor has obtained is
Sufficient & Appropriate to provide basis for the Auditor's opinion.
5. Going Concern The auditor shall conclude whether in auditor's judgement, a material uncertainty exists
related to events or conditions that individually or collectively may cast significant doubt on
the entity's ability to continue as a going concern.
6. Key Audit Matters 1. Mandatory for Listed entities
2. Otherwise, auditor decides to communicate key audit matters in Audit Report
7. Heading Auditor shall describe Management’s Responsibility
“Management 1. Preparing F.S in accordance with applicable FRF
Responsibility for the 2. Design and implement internal control to enable the preparation of financial of
Financial Statement” financial statement are free from material mis-statement
3. Assessing the ability of entity to continue as going concern
4. Whether the going concern assumption is appropriate.
8. Auditor’s Objective of the auditor
Responsibilities for 1. Obtain reasonable assurance whether the FS as a whole are free from material
the Audit of misstatement, whether due to fraud or error
Financial statement 2. Issue an auditor's report that includes the auditor's opinion.

That reasonable level of assurance is high level of assurance not a guarantee.

That misstatements can arise from fraud and error
1. Describe that mis-statements are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users.
2. Provide a definition or description of materiality.
9. Location of 1. Within the body of Audit Report
description of 2. Within the appendix of Audit Report give the reference of these appendix in Audit
Auditor’s Report
Responsibilities for 3. By specific reference within Audit Report
the Audit of 4. Website of an Appropriate Authority where Law or National Auditing Standards
Financial expressly permits to do so.
Statement
10. Other Reporting in separate section with the heading "Report on other Legal and Regulatory Requirements"
Responsibilities or otherwise as appropriate to the content of the section.
11. Signature of Audit • Audit report to be signed in auditor's personal name.
Report • Where firm appointed as auditor, report signed in personal name & in the name of
audit Firm, Also mention membership number of ICAI, include, wherever applicable
the registration number of firm allotted by ICAI.

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12. Place of Signature Ordinarily the city where audit report is signed.
13. Date of Audit The auditor's report shall be dated no earlier than the date on which the auditor has
Report obtained
Sufficient Appropriate Audit Evidence on which to base the auditor's opinion on the FS
including.

Specific Evaluations by the Auditors

a) The Financial Statements adequately disclose the significant accounting policies selected and applied.
b) The accounting policies selected and applied are consistent with the applicable FRF and are appropriate.
c) Management's accounting estimates are reasonable.
d) Information in the FS is relevant, reliable, comparable and understandable.
e) FS provide adequate disclosures of material transactions & events.
f) Terminology used in FS is appropriate and including its title.
Qualitative Aspects of the Entity's Accounting Practices
1. Consider management judgements about the amounts and disclosures in the FS.
2. Discussion of qualitative aspects of accounting practice with management as per SA 260 (Revised)
3. Consider the possibility of biasness (lack of neutrality) in Management's judgements. The auditor may conclude that
lack of neutrality together with uncorrected misstatements causes the financial statements to be materially misstated

Indicators of lack of neutrality

a) Selective correction of misstatements by management
b) Management's biasness in making accounting estimates

4. Consider the possible management biasness in making accounting estimates (SA 540).

SA-710 – Comparative 1. Corresponding figures

information 2. Comparative financial information
OBJECTIVES 1. To obtain sufficient appropriate audit evidence- whether the comparative
information included in the FS. has been presented in all material respects in
accordance with the requirements for comparative information in the applicable
FRF
2. To Report - In accordance with the auditor's reporting responsibilities
Audit Procedures regarding Comparative Information
EVALUATE 1. Whether the comparative information agrees with amount and other disclosures
presented in prior period
2. Whether accounting policies reflected in the comparative information are consistent
with those applied in current period whether changes in accounting policies any have been
properly accounted for and adequately presented and disclosed.
Audit reporting 1. when corresponding figures are available Auditor's opinion shall not refer to
corresponding figures corresponding figures except
Auditor's report in prior period included:
a. A qualified opinion
b. A disclaimer of opinion
c. An adverse opinion; and matters which gave rise to the modification is still unresolved
2. Auditor obtain audit evidence that a material statement exist in prior period financial
statement on which unmodified opinion was issued the auditor shall verify whether the
miss statement has been dealt with as required under applicable FRF, if not express a
qualified or an adverse opinion on the current period financial statement.
3. Prior period financial statement are not audited the auditor shall include in other matter
paragraph that corresponding figures are unaudited but this does not relive the Auditor
from need to obtain sufficient appropriate audit evidence that the opening balance do not
contain Mis-statement that material affect the current period financial statement
COMPARATIVE FINANCIAL Auditor’s opinion to refer each period for which financial statements are presented and on
STATEMENT which opinion is expressed

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Prior Period FS Audited by Audit Report to also contain Other matter para, stating that:
Another Auditor • FS of prior period were audited by predecessor auditor.
• Type of opinion expressed by him (Reasons for Modification if any)
• Date of that report.

If material misstatement exists in prior period FS (not reflected in previous audit report,
previously reported without modification):
1. Communicate misstatement to management/ TCWG
2. Request that predecessor auditor be informed.
• If Prior period FS are amended
• The predecessor auditor agrees to issue new audit report the auditor shall report
on the current period only

THANKS FOR PATIENCE READING

TEAM CANOTESCOMMUNITY

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