Standar Auditing (SA) is tens of standards established and approved by the

Indonesian Institute of Certified Public Accountants (IAPI), which consists of standar

umum (general standard), standar pekerjaan lapangan (fieldwork standards), and
standar laporan beserta intepretasinya (reporting standard and their interpretations).
There are several lists of these standards, such as SA 200, SA500, etc. In this article,
we will look more closely to SA 700, SA 705, and SA706.

SA 700 is about ‘Forming an opinion and reporting on financial statements.’ The

chapters included in SA 700 are the introduction, objectives, definitions, requirement,
application, and other explanatory material. The introduction talks about the scope
about SA 700 (deals with the auditor’s responsibility to form an opinion on the
financial statements and this SA also regulates the form and content of the auditor's
report issued as a result of an audit of the financial statements.) The effective date of
SA is January 1st, 2013 for the issuer (emiten) and January 1st 2014 for entities other
than the Issuer (emiten). The second chapter tells about the objective of being an
auditor, which is to form and express an opinion clearly through a written report. The
next section is a definition. In definition, some terms are explained for SA purposes,
such as general-purpose financial statements and so on.

The most mandatory part is requirements; it is included 4 subchapters which describes

the requirements in details way:

• Forming an opinion on the financial statement (the auditor shall: form an

opinion in all material respects and according with the financial reporting
network; conclude whether they have obtained reasonable assurance; evaluate
the financial statement);
• Form of opinion (the auditor shall: express an unmodified opinion);
• Auditor’s report (the report shall: be in writing, have a title that clearly
indicates that it is independent, be addressed, includes introductory,
management's responsibility for Financial Statements, auditor’s responsibility,
auditors’ opinion, other reporting responsibilities, auditor's signature, audit
report date, auditor's address, standard form of auditor's report without
modification)
• Supplementary information presented with the financial statement (if it is not
required, the auditor shall evaluate whether it is nevertheless an integral part
of the financial statements and shall be covered by the auditor’s opinion)

In those subchapters, there is detailed information about how auditors should perform
and what procedures they should follow while forming an opinion.

The last subchapter is application and other explanatory material. It covers all
explanation about qualitative aspects of the entity’s accounting practices, disclosure
of the effect of the material transaction and events as well as a description of the
applicable financial reporting framework.

SA 705 is about the modifications to the opinion in the independent auditor’s report.
It also has five chapters, which are the same with SA 700.

The first chapter is the introduction, which describes the scope of this SA (auditor’s
 responsibility to issue an appropriate report in circumstances when, in forming an
opinion in accordance with proposed SA 700), types of modified opinion (3 types: a
qualified opinion, an adverse opinion, and a disclaimer opinion), and the effective
date is January 1st, 2013 for the issuer (emiten) and January 1st 2014 for entities other
than the Issuer (emiten). The second chapter talks about the objective of the auditor,
which is to express clearly, an appropriately modified opinion based on the audit
evidence and free from material misstatement. Different from SA 700, the definition
part states that for the purposes of the SAs, they use terms ‘pervasive’ in the context
of mistakes, to describe the effects on the possibility of misstatement. They also group
a qualified opinion, an adverse or a disclaimer of opinion as modified opinion.

The fourth chapter is the requirements, it includes:

⁃ Circumstances When a Modification to the Auditor’s Opinion Is Required (when
financial statements as a whole are not free from material misstatement or auditor is
unable to obtain sufficient evidence)
⁃ Determining the Type of Modification to the Auditor’s Opinion:
• Qualified opinion (have sufficient audit evidence but concludes as
misstatement and material; unable to obtain evidence to base the opinion but
can concludes that the possible effect on misstatements could be material)
• Adverse opinion (have sufficient evidence, concludes that misstatements are
both material and pervasive to the financial statements)
• Disclaimer of opinion (unable to obtain enough evidence and the
misstatements, if any, could be, material and pervasive; extremely rare
circumstances involving multiple uncertainties)
⁃ Form and Content of the Auditor’s Report When the Opinion Is Modified:
• Auditor’s opinion (when auditor modifies the audit opinion, he or she shall use
the heading ‘’Qualified Opinion’’, ‘’Adverse opinion’’. or ‘’Disclaimer
opinion’’)
• Basis for opinion (When the auditor modifies the opinion, they shall in
addition to the specific elements required by proposed SA 700 revised)
• Description of Auditor’s Responsibilities for the Audit of the Financial
Statements When the Auditor Disclaims an Opinion (When the auditor
disclaims an opinion because of the lack of evidence, the auditor shall amend
the description of the auditor’s responsibilities required by paragraphs 36–38
of proposed SA 700 revised)
• Special Considerations When the Auditor Disclaims an Opinion
⁃ Communication with Those Charged with Governance (When the auditor expects to
modify the opinion, they shall communicate with those charged with governance the
circumstances that led to the expected modification and the proposed wording of the
modification)

The last part of this SA is about application and other explanatory material which re-
describe about the types of the modification and the requirements needed and the
application.

SA 706 is about ‘Emphasis of matter paragraphs in the independent auditor’s report’.

Same with other SAs, this contains 5 chapters.
The first chapter is the introduction which talks about the scope of this SA (deals with
additional communication in the auditor’s report) and the effective date is January 1st,
2013 for the issuer (emiten) and January 1st 2014 for entities other than the Issuer
(emiten). The objective for the auditor while forming an opinion is to get user’s
attention by way of clear additional communication in the auditor’s report to a matter
or as appropriate.

The definitions some of the following terms mean: Emphasis of matter paragraph (A
paragraph included in the auditor’s report that refers to a matter appropriately
presented or disclosed in the financial statements, that it is fundamental to users’
understanding of the financial statements); 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 statements that is relevant to users’ understanding of the
audit, the auditor’s responsibilities or the auditor’s report).

Requirements:
-Emphasis of Matter Paragraphs in the Auditor’s Report (the auditor should include
emphasis of matter paragraph in the auditor’s report provided by enough evidence
that the matter is not materially misstated; use the heading ‘emphasis of matter’; make
it after the opinion paragraph, indicate that the auditor’s opinion is not modified in
respect of the matter emphasized)
-Other Matter Paragraphs in the Auditor’s Report (the auditor should make a
paragraph, with the heading ‘Other Matter’ and include this after opinion paragraph)
-Communication with Those Charged with Governance (If the auditor expect to
include an emphasis of matter or an other matter paragraph they should communicate
with those who charge with governance)

Application and other explanatory material:

• Emphasis of Matter Paragraphs in the Auditor’s Report
-Circumstances in Which an Emphasis of Matter Paragraph May Be Necessary
(uncertainty future, early application, a major catastrophe)
-Including an Emphasis of Matter Paragraph in the Auditor’s Report (The inclusion of
an Emphasis of Matter paragraph in the auditor’s report does not affect the auditor’s
opinion)
• Other Matter Paragraphs in the Auditor’s Report
-Circumstances in Which an Other Matter Paragraph May Be Necessary (Relevant to
Users’ Understanding of the Audit; Relevant to Users’ Understanding of the Auditor’s
Responsibilities or the Auditor’s Report; Reporting on more than one set of financial
statements)
-Including an Emphasis of Matter Paragraph in the Auditor’s Report (The content of
the Other Matter paragraph reflects clearly that such other matter is not required to be
presented and disclosed in the financial statements)