Types of Auditor's Opinions

Flashcards about auditor's opinions and related standards.

What does ASA 700 (ISA 700) cover?

Covers the auditor’s responsibility to form an opinion on the financial report, as well as the form and content of unmodified auditor’s reports.

What are the types of modified opinions an auditor can issue according to ASA 705 (ISA 705)?

Qualified opinion, disclaimer of opinion, and adverse opinion.

What are the additional disclosures that might be included in an auditor’s report according to ASA 706 (ISA 706)?

Emphasis of Matter paragraph and Other Matter paragraph.

What is an Emphasis of Matter paragraph?

A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial report, which is fundamental to users’ understanding.

What is an Other Matter paragraph?

A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial report, relevant to users’ understanding of the audit.

What are unmodified auditor's reports?

They are standard unmodified reports, containing standard unmodified opinions and no additional explanatory information.

What conditions must be met for an auditor to issue an unmodified report?

The financial report has been prepared in accordance with the Corporations Act 2001 and complies with IFRSs.

What conditions are considered pervasive to the financial report?

They are not confined to specific elements, accounts or items of the financial report, represent a substantial proportion of the financial report if confined, and are fundamental to users’ understanding in relation to disclosures.

When is a qualified opinion expressed?

Misstatements are material but not pervasive, or the auditor is unable to obtain sufficient appropriate evidence but the possible effects could be material but not pervasive.

What does a qualified opinion indicate?

Certain circumstances exist which in the auditor’s opinion are material or are likely to be material; however, they are not so material or so pervasive as to affect the subject matter as a whole.

When should an adverse opinion be expressed?

The effect of the misstatements are so material and pervasive that the financial report taken as a whole is misleading or of little use.

What does an adverse opinion mean?

The subject matter taken as a whole is misleading or of little use to the addressee of the auditor’s report.

When is a disclaimer of opinion expressed?

The auditor is unable to obtain sufficient appropriate evidence to form an opinion, and they conclude that the possible effect of undetected misstatements on the financial report could be both material and pervasive.

What does a disclaimer of opinion mean?

The auditor is unable to express an opinion on the subject matter as a whole; a scope limitation exists, where sufficient appropriate audit evidence cannot be reasonably obtained and the possible effects of any adjustments might be material and pervasive to the subject matter.

What is emphasis of matter not a substitute for?

Is not a substitute for reporting in accordance with ASA 570/ISA 570 when a material uncertainty exists relating to events or conditions that may cast significant doubt on an entity’s ability to continue as a going concern.

What are examples of circumstances in which the auditor may consider it necessary to include an Emphasis of Matter paragraph?

Uncertainty relating to the future outcome of exceptional litigation or regulatory action, early application (where permitted) of a new accounting standard, or a major catastrophe that has had, or continues to have, a significant effect on the entity’s financial position.

What does the ability to include an Other Matters paragraph do?

Allow the auditor to draw the user’s attention to any other matters, not presented or disclosed in the financial report, that the auditor believes are sufficiently important to be highlighted.