SA 700

Standard on Auditing (SA) 700 (Revised)

Forming an Opinion and Reporting on Financial Statements

Contents

  • Introduction

  • Scope of this SA

    • Paragraphs 1−4

  • Effective Date

    • Paragraph 5

  • Objectives

    • Paragraph 6

  • Definitions

    • Paragraphs 7–9

  • Requirements

    • Forming an Opinion on the Financial Statements

      • Paragraphs 10−15

    • Form of Opinion

      • Paragraphs 16−19

    • Auditor’s Report

      • Paragraphs 20−50

    • Supplementary Information Presented with the Financial Statements

      • Paragraphs 51-52

  • Application and Other Explanatory Material

    • Qualitative Aspects of the Entity’s Accounting Practices

      • Paragraphs A1−A3

    • Disclosure of Material Transactions and Events

      • Paragraph A4

    • Description of Applicable Financial Reporting Framework

      • Paragraphs A5−A10

    • Form of Opinion

      • Paragraphs A11−A12

    • Auditor’s Report

      • Paragraphs A13−A69

    • Supplementary Information Presented

      • Paragraphs A70-A76

  • Appendix: Illustrations of Auditor’s Reports

Introduction

Scope of this SA

  1. This SA outlines the auditor's responsibility in forming an opinion on financial statements and details the content and form of the auditor's report.

  2. SA 701 addresses the auditor's obligation to communicate key audit matters.

  3. This SA applies to the audit of a complete set of general-purpose financial statements, with special considerations detailed in SA 800 and SA 805.

  4. The requirements established within this SA balance consistency in global auditor reporting with the necessity for relevant information for users.

Effective Date

  1. This SA is effective for audits beginning on or after April 1, 2018.

Objectives

  1. The auditor aims to:

    • Form an opinion on the financial statements based on evaluated audit evidence.

    • Clearly express that opinion in a written report.

Definitions

  1. General Purpose Financial Statements: Prepared under a general purpose framework.

  2. Financial Reporting Framework: Designed for common information needs of diverse users.

  3. Unmodified Opinion: An opinion that financial statements comply materially with the reporting framework.

Requirements

Forming an Opinion on Financial Statements

  1. The auditor must judge if the financial statements align with the applicable financial reporting framework.

  2. To do so, the auditor needs to ascertain if reasonable assurance indicates that the statements are free from material misstatement. Factors include:

    • Adequate audit evidence acquired

    • Evaluation of material uncorrected misstatements

  3. The auditor evaluates:

    • Disclosure of significant accounting policies

    • Consistency of accounting policies with frameworks

    • Reasonableness of management’s estimates

    • Reliability and relevance of statement information

  4. For fair presentation frameworks, the auditor checks overall presentation, structure, and content.

  5. The financial statements must adequately refer to the applicable reporting framework.

Form of Opinion

  1. Express unmodified opinion when financial statements meet all framework requirements.

  2. Modify the opinion if financial statements are materially misstated or if insufficient audit evidence exists.

  3. Discuss fair presentation issues with management, potentially modifying opinion.

  4. Compliance frameworks do not necessitate evaluating fair presentation unless misleading.

Auditor’s Report

  1. The report must be in writing and titled to show it is from an independent auditor.

  2. Addressing the report should match engagement circumstances.

  3. The opinion section should list:

    • The audited entity

    • Confirmation of audit conduct

    • Titles of each financial statement

    • References to notes, including significant accounting policies

  4. For fair presentation frameworks, use “present fairly” or “give a true and fair view.”

  5. Indicate the framework's origin if not recognized standards.

  6. Include a section titled “Basis for Opinion” post-opinion describing audit compliance with SAs.

  7. If applicable, report in accordance with SA 570 concerning going concern.

  8. Communicate key audit matters for listed entities according to SA 701.

Responsibilities of Management

  1. Management needs responsibility over the financial statements and internal controls to prevent material misstatements.

  2. This incorporates assessing going concern issues and overseeing the reporting process.

Responsibilities of Auditor

  1. Auditor's responsibilities defined, emphasizing the audit's assurance level and potential for undetected material misstatements.

  2. Communicate risks assessed, design procedures, and evaluate the effectiveness of internal control systems.

Other Reporting Responsibilities

  1. Depending on entity type, there may be additional reporting responsibilities regarding governance and regulations.

Illustrations

Appendix includes various auditor's report illustrations tailored to specific scenarios, including listed and unlisted companies, and compliance frameworks.