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Auditors Report

The document outlines the structure and content of an auditor's report, emphasizing the importance of the auditor's opinion based on evidence gathered during the audit. It details various components of the report, including the opinion paragraph, basis for opinion, key audit matters, and the responsibilities of both management and auditors. Additionally, it discusses the implications of modified opinions and the use of emphasis of matter and other matter paragraphs.

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Ramosesanyane Ramokone
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6 views

Auditors Report

The document outlines the structure and content of an auditor's report, emphasizing the importance of the auditor's opinion based on evidence gathered during the audit. It details various components of the report, including the opinion paragraph, basis for opinion, key audit matters, and the responsibilities of both management and auditors. Additionally, it discusses the implications of modified opinions and the use of emphasis of matter and other matter paragraphs.

Uploaded by

Ramosesanyane Ramokone
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Auditors Report

AUDITORS' REPORTS
Learning Outcomes

• Determine the form and content of an unmodified auditor’s report and assess the
appropriateness of the contents of an unmodified auditor’s report.[3]
• b) Recognise and evaluate the factors to be taken into account when forming an audit
opinion in a given situation and justify audit opinions that are consistent with the results of
audit procedures.[3]
• c) Critically appraise the form and content of an auditor’s report in a given situation.[3]
• d) Assess whether or not a proposed audit opinion is appropriate.[3]
• e) Advise on the actions which may be taken by the auditor in the event that a modified
auditor’s opinion is issued.[3]
• f) Explain the implications for the auditor’s report on the group financial statements of an
entity where the opinion on a component is modified in a given situation.[2]
• g) Recognise when the use of an emphasis of matter paragraph, other matter paragraph
and KAM disclosure would be appropriate.[3]
Introduction

• The auditor’s report includes a clear expression of


opinion on the financial statements as a whole.
• The audit opinion has to be based on evidence
obtained in the course of the audit
• Auditors need to collect evidence that will support
their opinion on the financial statements.
Important Phrases

• ‘Opinion’: there is nothing absolute here. Different


firms of auditors could quite legitimately come to
different opinions.
• ‘Financial statements as a whole’. We are not just
looking at the statement of financial position in
isolation from the statement of profit or loss or the
notes. What’s important is the impression given by
the financial statements as a whole.
Financial Statements
The auditor’s report refers to financial
statements as follows
• The statement of financial position (or balance sheet).
• The statement of profit or loss and other
comprehensive income.
• The statement of changes in equity.
• The cash flow statement.
• The notes to the financial statements including
significant accounting policies
The parts of an auditor’s report
The title and addressees: Independent Auditor’s Report
• First of all, it is clearly titled ‘Independent Auditor’s Report'.
• That should mean that no one has any doubt about what
this document is. It next states to whom the report is
addressed and that’s the members (i.e. shareholders) of
the company.
The parts of an auditor’s report
The audit opinion and identification of what’s been audited
• The opinion paragraph comes right at the top of the report.
• An unmodified opinion will state that the financial statements give a true and fair view
(or present fairly, in all material respects), and have been prepared in accordance with
International Financial Reporting Standards (IFRSs).
As appropriate, depending on the type of opinion given, this paragraph can be named:

• Opinion

Modified Opinion
• Qualified opinion
• Adverse opinion
• Disclaimer of opinion
The parts of an auditor’s report
• The title is modified to alert users about problems.
The opinion paragraph must:
• Identify the entity whose financial statements
have been audited.
• State that the financial statements have been
audited.
• Identify the title of each element of the financial
statements and the period audited
The Basis for Opinion
• This will refer to compliance with the ISAs (complying with ISAs is key
to the basis of opinion) and will refer to the auditor’s responsibilities
section of the report. It must include an assertion of the auditor’s
independence and that other ethical matters have been complied with.
If the audit opinion has been modified, the explanation would be
here too.
As appropriate, this paragraph would be called:
• Basis for opinion
• Basis for qualified opinion
• Basis for adverse opinion
• Basis for disclaimer of opinion
Material uncertainty related to going concern (if one)

• A separate paragraph is required if there is a material


uncertainty related to the going concern of the
company. The need for such a paragraph is covered
more fully in the following chapter.
• This paragraph is not a modification of the audit
opinion – provided the uncertainty has been
adequately disclosed by the directors in the notes to
the financial statements.
Key audit matters

• Key audit matters are those matters that were


of most significance during the audit.
• There is then a full description of these matters
in accordance with ISA 701. This is covered in
more detail in the following slide
Emphasis of matter paragraph (if one)

• This paragraph is used to draw users’ attention to a matter already


properly disclosed in the financial statements. For example, a note
stating that there had been a fire at the company’s premises after
the date of the statement of financial position.
• An emphasis of matter paragraph is not a modification of the audit
opinion and It will state that the audit opinion is not modified in this
respect If the auditor's report also includes a key audit matters
section, the emphasis of matter paragraph may be presented
before that section, depending on their relative importance.
Other matter paragraph (if one)

This paragraph is used, if necessary, to communicate a matter that is not


presented or disclosed in the financial statements which is relevant to the
user's understanding of the audit, the auditor's responsibilities or the auditor's
report.
Circumstances in which an other matter paragraph may be necessary:
• Where the auditor reports on two sets of financial statements prepared under
different general purpose frameworks (e.g. a national framework and IFRS).
• Where the financial statements have been prepared for a specific purpose, to
state that the auditor's report is solely for the intended users.
• In the rare circumstance where the auditor is unable to withdraw from an
engagement even though a management-imposed limitation on the audit
may be pervasive
Other information paragraph (if one)

• For example, an audit covers the financial statements but does not
cover the directors’ report. So what if the directors’ report contains
something that conflicts with the financial statements? The audit
opinion cannot be modified because it does not cover the directors’
report, but perhaps the shareholders need to be alerted to this. This
can be done in a paragraph headed ‘Other Information’.
• This is not a modification of the audit opinion.

• Note that the interactions between the going concern section, key
audit matters section and emphasis of matter/other matters
paragraph are covered in detail in the following chapter.
Responsibilities of management and TCWG for
the financial statements

• This section is very important and points out that it


is management’s responsibility to prepare the
financial statements in accordance with the
International Financial Reporting Standards to
maintain the system of internal control and to
consider the going concern position of the company.
Auditor’s responsibilities for the audit of the
financial statements

• The auditors’ responsibilities are to obtain reasonable assurance


about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes their opinion.
• Name of the engagement partner, address of the auditing
firm, date the auditor’s report was signed and the
auditor’s signature
THANK YOU

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