Introduction
21.01 This Chapter discusses various matters pertaining to reporting in a financial statement audit, including:
• the form and content of the standard auditor’s report
• modifications to the opinion (qualified, adverse, or disclaimer)
• emphasis of matter and other matter paragraphs in the auditor’s report
• reporting on summary financial statements
21.02 This Chapter is written in the context of a complete set of financial statements prepared in accordance with a general purpose framework (a framework designed to meet the common financial information needs of a wide range of users, such as International Financial Reporting Standards issued by the International Accounting Standards Board). Such statements will normally include the balance sheet, the income statement, statement of changes in equity, and cash flows together with related notes.
21.03 International Standards on Auditing (ISA) 800, Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks, addresses reports on financial statements prepared in accordance with a special purpose framework (a framework designed to meet the financial information needs of specific users, such as the cash or tax basis of accounting). ISA 805, Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement, addresses reports on single financial statements and elements, accounts or items of a financial statement.
Forming an Opinion
21.04 Upon completion of the audit, the audit team must form an opinion on the financial statements. In doing so, the audit team determines whether the financial statements are free from material misstatement based on the audit evidence obtained and considers:
• uncorrected misstatements
• scope limitations
• the qualitative aspects of the company’s accounting practices
• bias in management’s judgments and estimates
• whether disclosures beyond those required by the framework are necessary for fair presentation, or for the financial statements not to be misleading
21.05 An unmodified opinion is expressed when the audit team concludes that the financial statements are prepared in accordance with the framework, and the audit team obtained sufficient appropriate audit evidence to make such conclusion. When a material misstatement exists or when there is a scope limitation, the opinion is modified, as discussed later in this Chapter.