Chapter Eighteen
Reports on
Audited Financial
Statements
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Audit Report with an Unmodified Opinion
The audit report with an unmodified opinion is issued
when the financial statements conform to the
applicable financial reporting framework.
Nine Elements
1. Report title
2. Addressee
3. Introductory paragraph
4. Management’s responsibility
5. Auditor’s responsibility
6. Auditor’s opinion
7. Auditor’s signature
8. Audit report date
9. Auditor’s 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 An other matter
paragraph does not affect paragraph does not affect
the auditor’s opinion the auditor’s opinion
because it can only be because it relates to a
included in the audit matter other than those
report if the matter is required to be presented
appropriately presented or disclosed in the
or disclosed in the financial statements.
financial statements.
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Emphasis of Matter Paragraph
A matter, although appropriately presented or disclosed in
the financial statements, that is of such importance that it is
fundamental to users’ understanding of the financial
statements
• The emphasis of matter paragraph is included immediately
after the opinion paragraph in the audit report and the heading
‘Emphasis of Matter’ is ordinarily used.
• The paragraph includes 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.
• The auditor should indicate that the auditor’s opinion is not
modified in respect of the matter emphasized.
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Emphasis of Matter Paragraph for
Going-Concern Problems
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Emphasis of Matter Paragraph
An emphasis of matter paragraph is used only if
the matter is of such importance that it is
fundamental to users’ understanding of the
financial statements.
Auditing standards give these examples:
•An uncertainty relating to the future outcome of
exceptional litigation or regulatory action.
•Early application (where permitted) of a new accounting
standard that has a pervasive effect on the financial
statements in advance of its effective date.
•A major catastrophe that has had, or continues to have,
a significant effect on the entity’s financial position.
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Other Matter Paragraph
• The term ‘other matter’ is used because the matter
communicated is a matter other than those that are
presented or disclosed in the financial statements.
• The other matter must relate to the understanding of
the audit, the auditor’s responsibilities or the auditor’s
report.
• An other matter paragraph is headed ‘Other Matter’
and the paragraph is included in the audit report
immediately after the opinion paragraph and any
emphasis of matter paragraph.
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Other Matter Paragraph
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Conditions of Modification
Auditor’s inability to obtain
Scope
sufficient appropriate
Limitation
evidence
Departure from The financial statements are
the prepared or presented in a
Applicable manner that conflicts with the
Financial applicable financial reporting
Reporting framework
Framework
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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.
Reports on
specialized
areas.
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Reports on Comparative Financial
Information
Corresponding figures are comparative
information where amounts and other
disclosures for the prior periods are an integral
part of the current-period financial statements,
and are intended to be read only in relation to
current-period figures.
Comparative financial statements are considered
separate financial statements and are included
for comparison with the financial statements of
the current 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 Reporting on single
financial statements financial
prepared in statements or
accordance with a elements of a
special purpose financial statement.
framework.
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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A Single Financial Statements or
Elements of Financial Statements
In some situations an auditor may be
engaged to audit a single financial
statement, specified elements, accounts,
or items of the financial statements.
Special
General Purpose
Framework Basis of Purpose
Accounting Framework
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Reporting on Summary Financial Statements
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End of Chapter 18
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