Unmodified opinion
Auditor is satisfied that the evidence obtained is sufficient and appropriate and supports the view presented in the FS prepared by the company’s management
Climate related risks rant could give rise to material misstatements
Appropriateness or adequacy of disclosures eg. Not properly disclosing effect of climate related risks
Application of the entity’s accounting policies eg inappropriate recognition of assets due to the effect of climate related risks
Implications of non compliance with relevant laws/regulations
If the auditor expects to include an emphasis of matter paragraph
Communicate with those charged with governance regarding the expectation and proposed wording of the paragraph
Examples of circumstances for emphasis of matter
An uncertainty relating to the future outcome of exceptional litigation
A significant subsequent event that occurs between the date of the FS and the date of the auditors report
Early application of a new accounting standard that has a material effect on the FS
a major catastrophe that has has a significant effect on the entity’s financial position
Other matter paragraphs examples
Where the prior period fs wer audited by another auditor
Where the prior period fs were not audited
Types of opinion an auditor can give
Unmodified auditors report
Modified auditors report with an unmodified audit opinion
A modified auditors report with a modified opinion
Emphasis of matter report
Modified auditors report
Emphasis of matter paragraph describing the situation giving rise to the matter and the effects on the FS, including the effect on the FS, if the resolution of certainty cannot be quantified.
Audit opinion is unmodified eg give a true and fair view
The auditor shall modify the opinion when
The auditor concludes that the fs as a whole are not free from material misstatement eg where there is disagreeemnt with management about the accounting policies, treatment or disclosure
Qualified opinion
Misstatements are material but not pervasive to the fs
When there is insufficient evidence (limitation on the scope of the audit) : the possible effects of the misstatements, if any, could be material but nit pervasive
Adverse opinion
Misstatements are both material and pervasive to the fs , such that the auditor concludes that the accounts do not give a true and fair view
A disclaimer if opinion
The possible effects of undetected material misstatements on the fs could be both material and pervasive , so serious that the auditor is unable to form an opinion on the fs
Where the gc assumption is appropriate
Unmodified opinion, fs are fairly presented
Include a conclusion relating to going concern section
Where the gc assumption is appropriate but with material uncertainty
Unmodified opinion, fs are fairly presented
Include a ‘material uncertainty relating to. Gc section’
Gc assumption inappropriate
Unmodified opinion! Fs are fairly presented
Consider including an emphasis of matter paragraph to draw attention to alternative basis of preparation
Adverse opinion, material and pervasive misstatement
Qualified report
Fs are presented in a true and fair manner except for certain specific issues
What three opinions are included in a uk unmodified auditors report
Give a true and fair view
Been properly prepared in accordance with uk gaap
Have been prepared in accordance with ca 2006
Scope paragraph includes
A reference to appropriate accounting policies
A reasonable assurance statement
A summary of the nature of audit work
What is a bannerman paragraph
A statement limiting the liability of the auditors to the company and its members
In what two situations should an audit opinion be modified
The FS are materially misstated
The auditor has been unable to obtain sufficient appropriate audit evidence
If the fs are prepared on the liquidation basis and the auditor agrees with this
An unmodified audit opinion will be issued but the auditor would include an emphasis of matter paragraph to emphasis the fact the company is no longer a going concern to shareholders
Adavantages of use of standardised auditors reports
Standard acts as a quality assurance mechanism ie all auditors reports contain the same level of information for shareholders
Enhances clarity and understanding as it is produced on a consistent basis
Makes preparation for the auditor easier. Auditor knows they are satisfying their legal and professional responsibilities on the signing of this report
Disadvantages of standardised auditors reports
Danger that readers and users of accounts become over familiar with the report and feel it is not tailored to their company and not relevant to them
Could be seen as inflexible
Included a certain amount of technical jargon but does not allow the auditor to explain these terms, particularly relevant to smaller companies
