MODIFICATIONS TO THE INDEPENDENT AUDITOR’S REPORT (BASED ON PSA 701)

Matters that do not affect the auditor’s opinion

● You may add an emphasis of matter paragraph to the report to highlight a matter

affecting the financial statements which is included in the note of the financial

statements that more extensively discuss the matter

● The paragraph would preferably be included after the opinion paragraph but before the

section on any other reporting responsibilities, if any.

● Emphasis of matter paragraph is used to highlight the existence of:

● Material uncertainty relating to the event or condition that may cast significant

doubt on the entity’s ability to continue as a going concern; or

● Significant uncertainty (other than a going concern problem), the resolution of

which is dependent upon future events and which may affect the financial

statements

● Emphasis of matter paragraph to report on matters other than those affecting the

financial statements. For example, if an amendment to other information in a document

containing audited financial statements is necessary and the entity refuses to make an

amendment

Example of an emphasis of matter paragraph relating to a going concern problem:

44Without qualifying our opinion, we draw attention to Note X in the financial statements which

indicates that the Company incurred a net loss of P_____ during the year ended December 31,20X1 and,

as of date, the company’s current liabilities exceeded its total assets by P_____. These conditions, along

with other matters, as set forth in Note X, indicate the existence of a material uncertainty which may
cast

significant doubt about the Company’s ability to continue as a going concern.

Matters that affect the auditor’s opinion

● If the following circumstances exists that the auditor may not be able to conclude an

unqualified judgment and the effect of the matter is or may be material to the financial

statements:

● There is a limitation on the scope of the auditor’s work. – could lead to a

qualified opinion or a disclaimer of opinion

● A disagreement with the management regarding the acceptability of the

accounting policies selected the method of their application on the

adequacy of financial statement disclosures. Could lead to a qualified

opinion or an adverse of opinion.

Qualified opinion

● Should be expressed when the auditor concludes that the unqualified opinion cannot be

expressed but that the effect of any disagreement with management, or limitation on

scope is not so material and pervasive as to require an adverse opinion or a disclaimer of

opinion.

● A qualified opinion should be expressed as being “except for” the effects of the matter

to which the qualification relates.