700 Series

ISA 700 Page 144
ISA 700 (REVISED)
Forming an Opinion on the F/S (Ref: 10-15)
 Auditor shall conclude as to whether he has obtained reasonable assurance

 The conclusion shall take into account:
- Whether sufficient appropriate audit evidence has been obtained;
- Whether uncorrected misstatements are material, individually or aggregate;
- Other evaluations required by this ISA.
 Auditor shall form an opinion that F/S are prepared in accordance with AFRF.
 Evaluation shall include consideration of qualitative aspects of accounting practices,
including indicators of possible bias (lack of neutrality) in judgments.
- Such indicators include following:
 Selective correction of misstatements brought to their attention.
 Possible management bias in the making of accounting estimates.
In particular, auditor shall evaluate whether:

 F/S adequately disclose significant accounting policies selected and applied;
 Accounting policies are consistent with AFRF and are appropriate;
 Accounting estimates made by management are reasonable;
 Information presented in F/S is relevant, reliable, comparable, & understandable;
 Terminology used in F/S is appropriate;
 F/S provide adequate disclosures enabling intended users to understand the effect of
material transactions and events
Description of the Applicable Financial Reporting Framework (Ref: A10-A15)
 Auditor shall evaluate whether F/S adequately refer to or describe AFRF

 Such description is appropriate only if F/S comply with all requirements of that
framework that are effective during the period covered by F/S.
 This description should not contain limiting language
Reference to More than One Financial Reporting Framework
Where F/S prepared in accordance with two FRFs. Such reference is

 Appropriate only if F/S comply with both frameworks simultaneously.
 Not appropriate If F/S prepared in accordance with one FRF contains a reconciliation of
results shown under another framework
ISA 700 Page 145
Form of Opinion (Ref: 16-19, A16-A17)
 Express an unmodified opinion when concludes that F/S are prepared, in all material
respects, in accordance with AFRF.
 Modify the opinion ;If auditor concludes that F/S as a whole are not free from material
misstatement or he is unable to obtain sufficient appropriate evidence.
 When F/S, prepared in accordance with fair presentation framework, do not achieve fair
presentation, auditor shall discuss matter with management and consider to modify the
opinion in accordance with ISA 705
 When F/S prepared in accordance with compliance framework,

- Auditor is not required to evaluate whether F/S achieve fair presentation.
- If in extremely rare circumstances auditor concludes that such F/S are misleading,
auditor shall discuss matter with management and may determine to communicate in
report.
Auditor's Report (Ref: 20-49, A18-A69)
1 Title "Independent Auditor's Report"
2 Addressee As required by the circumstances of the engagement.

 Sometimes law or regulation specifies the addressee
 Normally it is addressed to shareholders or TCWG.
3 Auditor's  Identify entity whose F/S have been audited;

Opinion  State that F/S have been audited;
 Identify the title of each statement that comprises F/S;
 Refer to accounting policies & other explanatory info
 Specify the date or period covered by F/S.
For Fair presentation framework
Use one of following phrases

 “F/S present fairly, in all material respects, ... in accordance with
AFRF” ; or
 “F/S give a true and fair view of …. in accordance with AFRF”
For Compliance framework
“F/S are prepared, in all material respects, in accordance with AFRF”

ISA 700 Page 146
Description of AFRF
 "... in accordance with IFRS"; or

 "... in accordance with accounting principles generally accepted
in Jurisdiction X ..."
If AFRF contains both reporting standards & legal requirements

"... in accordance with International Financial Reporting Standards
and the requirements of Jurisdiction X Corporations Act."
If F/S prepared in accordance with two FRF(both applicable)

 If F/S comply with each framework individually, two opinions
are expressed (separately or in a single sentence).
 If F/S comply with one but fail to comply with other framework
an unmodified opinion can be given for one framework but a
modified opinion given with regard to other framework.
4 Basis for This section:

opinion  States that the audit was conducted in accordance with
International Standards on Auditing;
 Refers to the section of the auditor’s report that describes the
auditor’s responsibilities under the ISAs;
 Includes a statement that the auditor is independent of the entity
in accordance with the relevant ethical requirements relating to
the audit, and has fulfilled the auditor’s other ethical
responsibilities in accordance with these requirements.
 The statement shall identify the jurisdiction of origin of the
relevant ethical requirements or refer to the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional
Accountants (IESBA Code); and
 States whether the auditor believes that the audit evidence the
auditor has obtained is sufficient and appropriate to provide a
basis for the auditor’s opinion.
5 Going concern Where applicable, auditor shall report in accordance with ISA 570
(Revised)
6 Key Audit For audits of listed entities and other prescribed or selected entities,
Matters (KAM) auditor shall communicate “Key Audit Matters” in auditor’s report.
(as per ISA 701)
ISA 700 Page 147
7 Management's  Preparation of F/S in accordance with AFRF, and

Responsibility  Internal control necessary for preparation of F/S
 Assessing entity’s ability to continue as a going concern and
whether the use of the going concern basis of accounting is
appropriate as well as disclosing any matters relating to such.
This section shall also identify those responsible for the oversight of
the financial reporting process, when those responsible for such
oversight are different from the management.
8 Auditor's This section of the report shall state that:

Responsibility  Objectives of the auditor are to:
- Obtain reasonable assurance about whether F/S as a whole are
free from material misstatement, whether due to fraud or
error; and
- Issue auditor’s report that includes the auditor’s opinion.
 Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit will always detect a material
misstatement when it exists; and
 Misstatements can arise from fraud or error, and either:
- describe that they are considered material if, individually or in
the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these F/S;
or
- provide a definition or description of materiality in accordance
with AFRF
This section shall further:

 State that auditor exercise professional judgment and maintains
professional skepticism throughout the audit; and
 Describe an audit by stating that the auditor’s responsibilities
are:
- to identify and assess the risks of material misstatement of the
F/S, whether due to fraud or error
- to obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of internal control
- to evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related
disclosures made by management.
- to conclude on the appropriateness of management’s use of the
going concern basis of accounting
ISA 700 Page 148
This section also shall:

 State that the auditor communicates with TCWG regarding,
among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant
deficiencies in internal control that the auditor identifies during
the audit;
 For audits of F/S of listed entities, state that the auditor provides
TCWG with a statement that the auditor has complied with
relevant ethical requirements regarding independence and
communicate with them all relationships and other matters that
may reasonably be thought to bear on the auditor’s
independence, and where applicable, related safeguards; and
 Where “Key Audit Matters” are communicated, state that, from
the matters communicated with TCWG, the auditor determines
those matters that were of most significance in the audit of the
current period and are therefore the key audit matters.
This section shall be included:

 within the body of the auditor’s report;
 within an appendix to auditor’s report,
(Report shall include a reference to the location of appendix); or
 By a specific reference within auditor’s report to the location of
such a description on a website of an appropriate authority
9 Other Such other reporting responsibilities may be addressed in a

Reporting separate section of the report sub-titled “Report on Other Legal and
Responsibilities Regulatory Requirements”
In this case the auditor’s report would be having two separate

sections.
 Content # 3 – 7 of auditor’s report shall be under the sub-title
"Report on the F/S”
 "Report on Other Legal and Regulatory Requirements" shall
come after "Report on the F/S." (May contain sub-headings)
10 Name of the For Listed Companies only

Engagement
If, if in rare circumstances, such disclosure is reasonably expected to
Partner
lead to significant personal security threat, auditor should not include
the name and shall also discuss the severity with TCWG
11 Signature of the The auditor's report shall be signed; Either in name of audit firm,
Auditor auditor’s personal name or both (as appropriate)
ISA 700 Page 149
12 Auditor's Name the location in the jurisdiction where auditor practices. (not
Address the clients’)
13 Date Shall not be dated earlier than date on which the auditor has
obtained sufficient appropriate audit evidence on which to base the
auditor's opinion on F/S, including evidence that:
 F/S, including related notes, have been prepared; and
 Those with recognized authority have asserted that they have
taken responsibility for F/S.
Auditor's Report Prescribed by Law or Regulation (Ref: 50, A70-A75)

If law or regulation require auditor to use specific layout or wording of report, auditor's report
shall refer to ISA only if auditor's report includes, at a minimum above elements (1-8, 10-13)
Report in Accordance with Auditing Standards of Specific Jurisdiction and ISA (Ref: 51,
A76-A77)
Auditor's report may refer to ISA in addition to national auditing standards, but the auditor
shall do so only if
 There is no conflict between the requirements of both that would lead the auditor to
 Form a different opinion, or
 Not to include Emphasis of Matter paragraph that is required by ISAs; and
 Report includes, at a minimum, above elements (1-8, 10-13) when the auditor uses the
layout or wording specified by national auditing standards.
Auditor's report shall also identify the jurisdiction of origin of national auditing standards.
Supplementary Information Presented with the F/S (Ref: 53-54, A78-A84)

Auditor's evaluation whether unaudited supplementary information is presented in a manner
that could be considered as being covered by auditor's opinion includes its placement and
whether it is clearly labeled as "unaudited."
 If unaudited supplementary information (not required by AFRF) is presented with audited
F/S, auditor shall evaluate whether such information is clearly differentiated from audited
F/S.
 If it is not clearly differentiated from audited F/S, auditor shall ask management to
change its presentation
 If management refuses, auditor shall explain in report that such information has not
been audited.
 Management could change the presentation of unaudited supplementary information by:
 Removing any cross-references from F/S to unaudited supplementary notes so that
segregation between audited and unaudited information is sufficiently clear.
 Placing unaudited supplementary information outside F/S or at a minimum place
unaudited notes together required notes of F/S and clearly label them
ISA 700 Page 150
Illustration 1- Report on F/S of Listed Entity in Accordance with a Fair Presentation Framework
INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ABC Company [or Other Appropriate Addressee]
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the
statement of financial position as at December 31, 20X1, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, (or give a
true and fair view of) the financial position of the Company as at December 31, 20X1, and (of) its
financial performance and its cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs).
Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Company in accordance with
the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants
(IESBA Code) together with the ethical requirements that are relevant to our audit of the financial
statements in [jurisdiction], and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
[Description of each key audit matter in accordance with ISA 701.]
Other Information [or another title if appropriate such as “Information Other than the Financial
Statements and Auditor’s Report Thereon”]
[Reporting in accordance with the reporting requirements in ISA 720 (Revised) - see Illustration 1 in
Appendix 2 of ISA 720 (Revised).]
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRSs, and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
ISA 700 Page 151
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Paragraph 41(b) of this ISA explains that the shaded material below can be located in an Appendix to
the auditor’s report. Paragraph 41(c) explains that when law, regulation or national auditing
standards expressly permit, reference can be made to a website of an appropriate authority that
contains the description of the auditor’s responsibilities, rather than including this material in the
auditor’s report, provided that the description on the website addresses, and is not inconsistent with,
the description of the auditor’s responsibilities below.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
ISA 700 Page 152
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on Other Legal and Regulatory Requirements

[The form and content of this section of the auditor’s report would vary depending on the nature of the
auditor’s other reporting responsibilities prescribed by local law, regulation, or national auditing
standards. The matters addressed by other law, regulation or national auditing standards (referred to as
“other reporting responsibilities”) shall be addressed within this section unless the other reporting
responsibilities address the same topics as those presented under the reporting responsibilities required
by the ISAs as part of the Report on the Audit of the Financial Statements section. The reporting of other
reporting responsibilities that address the same topics as those required by the ISAs may be combined
(i.e., included in the Report on the Audit of the Financial Statements section under the appropriate
subheadings) provided that the wording in the auditor’s report clearly differentiates the other reporting
responsibilities from the reporting that is required by the ISAs where such a difference exists.
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate for the
particular jurisdiction]
[Auditor Address]
[Date]
ISA 700 Page 153
Illustration 4 - Report on Financial Statements of an Entity other than a Listed Entity Prepared in
Accordance with a General Purpose Compliance Framework

[Appropriate Addressee]
Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the balance
sheet as at December 31, 20X1, and the income statement, statement of changes in equity and cash flow
statement for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying financial statements of the Company are prepared, in all material
respects, in accordance with XYZ Law of Jurisdiction X.
Basis for Opinion

responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in [jurisdiction], and we
have fulfilled our other responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Statements
Management is responsible for the preparation of the financial statements in accordance with XYZ Law
of Jurisdiction X,12 and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.

ISA 700 Page 154
basis of these financial statements. Paragraph
41(b) of this ISA explains that the shaded material below can be located in an Appendix to the
auditor’s report. Paragraph 41 (c) explains that when law, regulation or national auditing standards
expressly permit, reference can be made to a website of an appropriate authority that contains the
description of the auditor’s responsibilities, rather than including this material in the auditor’s report,
provided that the description on the website addresses, and is not inconsistent with, the description
of the auditor’s responsibilities below.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
[Auditor Address]
[Date]
Important Paragraphs 13, 24, 28, 34, 38, 39, 41, A4, A6, A44, A73, A74, A79, A83
ISA 700 Page 155
Illustration - Format of Report - Auditors (Reporting Obligations) Regulations 2018
To the members of ………………… [name of company]
Opinion
We have audited the annexed financial statements (or revised financial statements, if applicable)i of
……..(the Company), which comprise the Statement of Financial Position as at ........., and the statement of
profit or loss ii and other comprehensive income or the income and expenditure statement, the
statement of changes in equity, the statement of cash flows for the year then ended and notes to the
financial statements, including a summary of significant accounting policies and other explanatory
information and we state that we have obtained all the information and explanations which, to the best
of our knowledge and belief, were necessary for the purposes of our audit.
In our opinion and to the best of our information and according to the explanations given to us, the
statement of financial position, statement of profit or loss and other comprehensive income or the
income or expenditure statement, the statement of changes in equity and the statement of cash flows
together with the notes forming part thereof conform with the accounting and reporting standards as
applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in
the manner so required and respectively give a true and fair view of the state of Company’s affairs as at
................... and of the profit or loss and other comprehensive income or loss, or the surplus or deficit iii,
the changes in equity and its cash flows for the year then ended.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in
Pakistan. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the
Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and
we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty relating to Going Concern (if applicable)
Emphasis of Matter (if applicable)
Key Audit Matter(s)
ISA 700 Page 156
Following are the Key audit matter(s):

Sr.No. Key audit matter(s) How the matter was addressed in our audit
Information Other than the Financial Statements and Auditor’s Report Thereon
[Reporting in accordance with the reporting requirements in ISA 720 (Revised)]
Responsibilities of Management and Board of Directors for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with approved accounting standards as applicable in Pakistan and the requirements of
Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
cease operations, or has no realistic alternative but to do so. Board of Directors are responsible for
overseeing the Company’s financial reporting process.
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
 Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
ISA 700 Page 157
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with the board of directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the board of directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Based on our audit, we further report that in our opinion:

a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX
of 2017);
b) the statement of financial position, the statement of profit or loss and other comprehensive income or
the income and expenditure account, the statement of changes in equity and the statement of Cash flows
together with the notes thereon have been drawn up in conformity with the Companies Act, 2017 (XIX of
2017), and are in agreement with the books of account and returns;
c) investments made, expenditure incurred and guarantees extended during the year were for the
purpose of the Company’s business; and
d) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted
by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance
viii.
Other Matter(s)
Prior Year Financial Statements Audited by Predecessor Auditor
The engagement partner on the audit resulting in this independent auditor’s report is [name]
[Signature]
[Place/ location]
[Date]
ISA 701 Page 158
ISA 701
Scope of the ISA 701
This ISA deals with auditor’s responsibility to communicate Key Audit Matters (KAM) in
auditor’s report. The purpose of communicating KAM is to enhance the communicative value
of the auditor’s report by providing greater transparency about the audit that was performed.
Key Audit Matters(KAM)

Those matters that, in auditor’s professional judgment, were of most significance in the audit
of the F/S of current period. KAM are selected from matters communicated with TCWG.
Auditor shall communicate KAM in report for audits of

 Listed entities
 Entities other than listed entities (if required by law etc.)
 Other entities decided by auditor using his professional judgment
(e.g. those of significant public interest due to large number and wide range of stakeholders
and considering nature and size of the business like Banks, Insurance and charities etc).
Communicating KAM provides additional information to intended users of F/S to assist them
in understanding those matters that, in the auditor’s professional judgment, were of most
significance in the audit of the F/S of the current period.
Determining KAM (Ref: 9-10, A9-A30)
Auditor shall determine, from the matters communicated with TCWG, those matters that
required significant attention in performing audit.
In making this determination, auditor shall take into account:

 Areas of higher assessed risk of material misstatement, or significant risks identified (ISA-
315)
 Significant auditor judgments relating to areas in F/S involving significant management
judgment, including accounting estimates that have been identified as having high
estimation uncertainty.
 The effect on the audit of significant events or transactions that occurred during the period.
E.g. Auditor may have had extensive discussions with management and TCWG at various stages
throughout the audit about the effect of significant transactions with related parties or
significant transactions outside the normal course of business for the entity or that otherwise
appear to be unusual.
ISA 701 Page 159
Determining the relative significance of a matter
Other considerations that may be relevant to determining the relative significance of a matter
communicated with TCWG and whether such a matter is a key audit matter include:
 Importance of the matter to intended users’ understanding.
 Complexity or subjectivity involved in management’s selection of an appropriate policy
compared to other entities within industry.
 Nature and materiality (quantitatively or qualitatively) of the misstatements due to fraud
or error related to the matter, if any.
 Nature and extent of audit effort needed to address the matter, including:
- Extent of specialized skill or knowledge needed to apply audit procedures to address
the matter or evaluate the results of those procedures, if any.
- Nature of consultations outside the engagement team regarding the matter.
 Severity of any control deficiencies identified relevant to matter.
Communicating KAM (Ref: 11-12, A31-A33)
Auditor shall describe each matter, using an appropriate sub-heading, in a separate section of
report under the heading “KAM,” unless:
 Law or regulation precludes public disclosure about the matter
 Auditor determines that (in extremely rare circumstances) the matter should not be
communicated in report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
(not applicable if entity has publicly disclosed information about the matter)
Introductory language in this section shall state that:

 KAM are those matters that, in auditor’s professional judgment, were of most significance
in the audit of F/S [of current period]; and
 These matters were addressed in the context of audit of F/S as a whole, and in forming the
auditor’s opinion thereon, and the auditor does not provide a separate opinion on these
matters.
No KAM to communicate
If auditor determines (depending on the facts and circumstances of the entity and the audit)
that there are no KAM to communicate, the auditor shall include a statement to this effect in a
separate section of the auditor’s report under the heading “KAM.”
Illustration – Suggested wording in case of no KAM to communicate: [Except for the

matter described in the Basis for Qualified (Adverse) Opinion section or Material Uncertainty
Related to Going Concern section,] We have determined that there are no [other] KAM to
communicate in our report.
ISA 701 Page 160
Note:
Auditor shall not communicate a matter in KAM section, when auditor would be required to
modify the opinion (ISA 705 – Revised)
Descriptions of Individual Key Audit Matters (Ref: 13-16, A34-A51)
Description of each matter in the KAM section of the report shall

 Include a reference to the related disclosure(s), if any, in F/S;
 State that why the matter was considered to be one of most significance in the audit; and
 Specify how the matter was addressed in the audit
- A brief overview of procedures performed;
- An indication of the outcome of the auditor’s procedures; or
- Key observations with respect to the matter,
Description may also make reference to the principal considerations that led the auditor to
determine the matter to be one of the most significance, for example:
 New or emerging accounting policies
(E.g. Entity/industry specific matters on which engagement team consulted within the
firm)
 Changes in entity’s strategy or business model that had a material effect on F/S.
Reference to the related disclosure(s)

Entity may decide to include new or enhanced disclosures in F/S or elsewhere in the annual
report relating to a KAM in light of the fact that the matter will be communicated in the
auditor’s report.Auditor may also draw attention to key aspects of them.
Communication with TCWG (Ref: 17, A60-A63)
Communication with TCWG enables them to be made aware of the KAM and provides them an
opportunity to obtain further clarification.
Auditor shall communicate with TCWG:

 Those matters the auditor has determined to be the KAM; or
 Auditor’s determination that there are no KAM to communicate
(depending on facts and circumstances of entity and audit)
Important Paragraphs 11-18, A7, A12, A29, A41, A45, A46, A54, A58
ISA 705 Page 161
ISA 705 (REVISED)
Types of Modified Opinions (Ref: 2, A1)
Material &
Material
Pervasive
Materially misstatement
Qualified Adverse
(Disagreement)
Inability to obtain sufficient appropriate audit
Qualified Disclaimer
evidence(Scope Limitation)
In extremely rare circumstances involving multiple uncertainties if auditor concludes that it

is not possible to form opinion due to potential interaction of uncertainties and their possible
cumulative effect, auditor shall “Disclaim” the opinion
Modified Opinion
A Qualified opinion, an Adverse opinion or a Disclaimer of Opinion
Pervasive
A term used, in the context of misstatements, to describe the effects on the F/S of
misstatements or the possible effects on the F/S of misstatements, if any, that are undetected
due to an inability to obtain sufficient appropriate audit evidence. Pervasive effects on the F/S
are those that, in the auditor's judgment:
 Are not confined to specific elements, accounts or items of the F/S;
 If so confined, represent or could represent a substantial proportion of the F/S; or
 In relation to disclosures, are fundamental to users' understanding of the F/S.
Nature of Material Misstatements (Ref:3-10, A2-A12)

 Appropriateness of the Selected Accounting Policies
- Selected accounting policies are not consistent with AFRF
- F/S do not represent underlying transactions and events to achieve fair presentation
 Application of the Selected Accounting Policies
- Management has not applied the selected accounting policies consistently; or
- Method of application of selected accounting policies
 Appropriateness or Adequacy of Disclosures in F/S
- F/S do not include all disclosures required by AFRF;
- Disclosures are not presented in accordance with AFRF;
- F/S do not provide the disclosures necessary to achieve fair presentation.
ISA 705 Page 162
Nature of an Inability to Obtain Sufficient Appropriate Audit Evidence
Inability does not constitute a limitation if auditor is able to obtain sufficient appropriate audit
evidence by alternative procedures. Limitations may have other implications e.g. fraud risks
and engagement continuance.
 Circumstances beyond the control of the entity;
- Accounting records have been destroyed.
- Accounting records seized by Government.
 Circumstances relating to nature or timing of the auditor's work;
- Auditor is unable to observe counting of inventories due to timing of auditor's
appointment.
- Auditor determines that performing substantive procedures alone is not sufficient, but
entity's controls are not effective.
 Limitations imposed by management.
- Preventing from observing physical inventory counting.
- Preventing auditor from requesting external confirmation.
Consequence of an Inability to Obtain Sufficient Appropriate Audit Evidence Due to

Management-Imposed Limitation after the Auditor Has Accepted the Engagement
(Ref: 11-13, A13-A15)
Auditor shall request management to remove the limitation.

If management refuses to remove the limitation, auditor shall
 Communicate the matter to TCWG; and
 Determine whether to perform alternative procedures.
If auditor is unable to obtain sufficient appropriate audit evidence:

 If possible effects could be material; auditor shall qualify opinion;
 If possible effects on F/S could be both material and pervasive; the auditor shall:
- Withdraw from the audit, where practicable and possible; or
- Give disclaimer of opinion
(If withdrawal is not practicable or possible)
Practicality of withdrawing may depend on stage of completion of the engagement at the time
that management imposes the scope limitation.
Possibility may depend on legal binding on auditor to continue e.g.
 Auditor appointed to audit public sector entities.
 Jurisdictions where auditor is appointed to audit specific period and is prohibited from
withdrawing before completion of audit
If auditor decides to withdraws; auditor shall communicate to TCWG any matters giving rise to
a modification of the opinion
ISA 705 Page 163
Other Considerations Relating to an Adverse or Disclaimer of Opinion (Ref: 15, A16)

When expressing an adverse opinion or disclaimer, report shall not also include an
unmodified opinion
Exceptions:
 Unmodified opinion under one FRF and expression of an adverse opinion on same F/S
under any other FRF.
 Disclaimer of opinion regarding results of operations and cash flows only, and unmodified
opinion regarding financial position.
Form and Content of Auditor's Report When Opinion Is Modified (Ref: 16-29, A17-A26)
Opinion Paragraph
Qualified Except for the effects (or possible effects) of matter(s) described in the Basis for
Opinion Qualified Opinion paragraph:
 F/S present fairly, in all material respects (or give true and fair view) in
accordance with AFRF (fair presentation framework)
 F/S have been prepared, in all material respects, in accordance with AFRF
(compliance framework)
Adverse Because of the significance of the matter(s) described in the Basis for Adverse
Opinion Opinion paragraph:
 F/S do not present fairly (or give a true and fair view) in accordance with the
AFRF
(Fair presentation framework); or
 F/S have not been prepared, in all material respects, in accordance with AFRF
(Compliance framework)
Disclaimer  The auditor does not express an opinion on F/S.
of opinion  Because of significance of matter(s) described in Basis for Disclaimer
paragraph, auditor has not been able to obtain sufficient appropriate audit
evidence to provide a basis for an audit opinion; and, accordingly,
 Auditor was engaged to audit the F/S
Use the heading "Qualified Opinion," "Adverse Opinion," or "Disclaimer of Opinion," for the
opinion paragraph
Basis for Opinion Paragraph

 Amend the heading of “Basis for Opinion” to “Basis for Qualified Opinion,” “Basis for
Adverse Opinion,” or “Basis for Disclaimer of Opinion,” as appropriate; and
 Include a description of the matter giving rise to the modification in this section.
 Include description & quantification of financial effects.
- If it is not practicable to quantify the financial effects, the auditor shall state the fact.
- If it relates to narrative disclosures; include an explanation of how these are misstated
ISA 705 Page 164
 If material misstatement relates to non-disclosure of information:

- Discuss the non-disclosure with TCWG;
- Describe in basis for opinion section the nature of the omitted information;
- Unless prohibited by law or regulation, include omitted disclosures, if it is practicable
to do so
(Not be practicable where Disclosures not been prepared by management or not
available; or it would be voluminous)
 If modification results from inability to obtain sufficient appropriate audit evidence,
auditor shall include in the basis for opinion section the reasons for that inability.
 Even in case of adverse opinion or disclaimer, auditor shall describe the reasons for any
other matters that would have required a modification to the opinion
Auditor's Responsibility
Qualified or adverse opinion

Auditor shall amend the description by stating…
“the auditor believes that the audit evidence the auditor has obtained is sufficient and
appropriate to provide a basis for the auditor's modified audit opinion.”
Effect of disclaimer of opinion on “Key Audit Matters”

When auditor disclaims an opinion, the auditor’s report shall not include a KAM section (ISA
701)
Communication with TCWG (Ref: 30, A27)
This enables:
 Auditor to give notice to TCWG;
 Auditor to seek agreement of TCWG regarding the facts; and
 TCWG to provide further information and explanations.
Important Paragraphs 6-28, A1, A3, A4, A6, A7, A11, A16, A27
ISA 706 Page 165
ISA 706 (REVISED)
EMPHASIS OF MATTER PARAGRAPHS (Ref: 8-9)
Emphasis of Matter paragraph

A paragraph included in auditor's report that refers to a matter appropriately presented or
disclosed in the F/S thatin the auditor's judgmentis of such importance that it is fundamental
to users' understanding of the F/S.
Emphasis of Matter paragraph is not a substitute for either:

 Modified Opinion (ISA 705)
 Any Disclosure in F/S
 Reporting in accordance with ISA 570 when material uncertainty exists that may cast
significant doubt on going concern
The matter highlighted must not be a matter determined to be a key audit matter to be
communicated in report (ISA 701)
Examples
 An uncertainty relating to future outcome of exceptional litigation or regulatory action.
 A significant subsequent event that occurs between the date of F/S and the date of auditor’s
report
 Early application of a new accounting standard.
 A major disaster having a significant effect on financial position.
Presentation
 Include it as a separate section in auditor’s report;
 Use any appropriate heading including the term “Emphasis of Matter”;
 Clear reference to matter being emphasized and reference of relevant disclosure; and
 Indicate that auditor's opinion is not modified due to this matter.
OTHER MATTER PARAGRAPHS (Ref: 10-11)
Other Matter paragraph

A paragraph included in auditor's report that refers to a matter other than those presented or
disclosed in F/S that, in auditor's judgment, is relevant to
- Users' understanding of audit; or
- Auditor's responsibilities; or
- Auditor's report.
“Other Matter para” is not a substitute of the “Other Reporting Responsibilities” (ISA 700)
ISA 706 Page 166
The matter highlighted must not be a matter determined to be a key audit matter to be
communicated in report (ISA 701)
Examples
 Where auditor is unable to withdraw from an engagement, auditor may consider it

necessary to include this para to explain why it is not possible for auditor to withdraw
 Reporting on one set of F/S referring any other F/S audited by him
 Restriction on distribution or use of the auditor's report
Presentation
 Shall be included as a separate section in auditor’s report;

 Use “other matters” or any other appropriate heading.
Placement of the emphasis of matter or other matter paragraph in an auditor’s report

(Ref: A16-A17)
Depends on nature of the information to be communicated and the auditor’s judgment of the
relative significance of such information to intended users.
Emphasis of matter paragraph
 When it relates to the applicable FRF, the auditor may place it immediately following the
Basis of Opinion section
 When a KAM section is presented in auditor’s report, an Emphasis of Matter paragraph may
be presented either directly before or after the KAM section, based on the auditor’s
judgment as to the relative significance of the information included in this para.
 To differentiate it from the KAM section, Auditor may also add further context to its
heading
(e.g. “Emphasis of Matter – Subsequent Event”)
Other Matter Paragraphs
 When a KAM section is presented in auditor’s report, the auditor may add further context
to its heading to differentiate it from the individual matters described in the KAM section.
(e.g. “Other Matter – Scope of the Audit”)
Communication with TCWG (Ref: 12, A18)

If auditor expects to include an Emphasis of Matter or an Other Matter paragraph, the auditor
shall communicate with TCWG regarding this expectation and proposed wording
ISA 706 Page 167
Appendix 3 - Illustration of an Auditor’s Report that Includes a Key Audit Matters Section, an
Emphasis of Matter Paragraph, and an Other Matter Paragraph

Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the
statement of financial position as at December 31, 20X1, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, (or give a
true and fair view of) the financial position of the Company as at December 31, 20X1, and (of) its
financial performance and its cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs).
Basis for Opinion
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in
[jurisdiction], and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Emphasis of Matter
We draw attention to Note X of the financial statements, which describes the effects of a fire in the
Company’s production facilities. Our opinion is not modified in respect of this matter.
Key Audit Matters
Other Matter
The financial statements of ABC Company for the year ended December 31, 20X0, were audited by
another auditor who expressed an unmodified opinion on those statements on March 31, 20X1.
ISA 706 Page 168
Statements
[Reporting in accordance with ISA 700 (Revised) - see Illustration 1 in ISA 700 (Revised).]
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Auditor Address]
[Date]
Important Paragraphs 8-12, A5, A7, A16
How to deal with case study question in exam
Tutor’s
Note
ISA 706 Page 169
ISA 706 Page 170
ISA 710 Page 171
ISA 710
Comparative information
Amounts and disclosures included in the F/S in respect of one or more prior periods in
accordance with AFRF
Corresponding figures
Comparative info where amounts and other disclosures for the prior period are included as an
integral part of current period F/S, and are intended to be read only in relation to the amounts
and other disclosures relating to the current period (referred to as “current period figures”).
The level of detail presented in corresponding amounts and disclosures is dictated primarily
by its relevance to the current period figures.
Comparative F/S
Comparative info where amounts and other disclosures for prior period are included for
comparison with the F/S of current period but, if audited, are referred to in the auditor’s
opinion.
The level of info included in those comparative F/S is comparable with that of the F/S of the
current period.
Audit Procedures (Ref: 7-9, A1)

Auditor shall determine whether F/S include the comparative info required by AFRF and
whether such info is appropriately classified. Auditor shall evaluate whether:
 Comparative info agrees with amounts and other disclosures presented in prior period or
(when appropriate, been restated)
 Accounting policies reflected in comparative info are consistent with current one
(If there have been changes in policies, whether those changes have been properly
accounted for & adequately disclosed)
If auditor becomes aware of a possible material misstatement in comparative info, auditor

shall perform additional audit procedures to obtain sufficient appropriate audit evidence
about that.
If auditor had audited prior period’s F/S, auditor shall also follow the relevant requirements
of ISA 560.
(If prior period F/S are amended, auditor shall determine that the comparative info agrees
with amended F/S)
Auditor shall request written representations (as per ISA 580) for all periods referred to in
auditor’s opinion. Shall also obtain specific written representation regarding any
restatement made to correct a material misstatement in prior period F/S.
ISA 710 Page 172
Audit Reporting – Corresponding figures (Ref: 10-12, A2-A6)
When corresponding figures are presented, auditor’s opinion shall not refer to
corresponding figures (except stated below)
If auditor’s report on prior period included a modified opinion and that matter is still
unresolved, auditor shall modify auditor’s opinion on current period’s F/S.
In Basis for Modification paragraph, auditor shall either:

 Refer to both current period’s figures and corresponding figures in description of matter
(when effects of matter is material); or
 Explain that audit opinion has been modified because of the effects/possible effects of
unresolved matter on comparability of current period’s and corresponding figures. (In
other cases)
AUDITING
If auditor’s report on prior period included a modified opinion and matter is resolved and
properly accounted for in F/S, auditor’s opinion on current period need not to refer previous
modification.
If auditor obtains audit evidence that a material misstatement exists in prior periods on which
an unmodified opinion has been previously issued, and corresponding figures have not been
properly restated or appropriate disclosures have not been made, auditor shall express a
qualified opinion or an adverse opinion on the current period F/S
However if corresponding figures have been properly restated or appropriate disclosures have
been made in current period F/S, auditor’s report may include an Emphasis of Matter paragraph
Prior Period F/S Audited by a Predecessor Auditor (Ref: 13, A7)
If auditor is not prohibited by law or regulation from referring to the predecessor auditor’s
report on corresponding figures and decides to do so, auditor shall state in an Other Matter
paragraph:
 That F/S of prior period were audited by the predecessor auditor;
 Type of opinion expressed by the predecessor auditor
(if the opinion was modified, the reasons therefore)
 The date of that report
Prior Period F/S Not Audited (Ref: 14,A8)
Auditor shall state in an Other Matter paragraph that the corresponding figures are unaudited
(However such a statement does not relieve the auditor to obtain sufficient appropriate audit
evidence that the opening balances do not contain misstatements that materially affect current
period’s F/S)
ISA 710 Page 173
Audit Reporting – Comparative F/S (Ref: 15-16, A9-A11)
When comparative F/S are presented, auditor’s opinion shall refer to each period for which
F/S are presented and on which an audit opinion is expressed.
(Auditor may add any modification while expressing a different auditor’s opinion on the F/S of
the other period)
When reporting on prior period F/S with the current period’s audit, if auditor’s opinion on
such prior period F/S differs from the opinion previously expressed, auditor shall disclose the
substantive reasons for the different opinion in an Other Matter paragraph
Prior Period F/S Audited by a Predecessor Auditor (Ref: 17-18, A12)
Unless predecessor auditor’s report on prior period’s F/S is reissued with F/S, Auditor shall
state in an Other Matter paragraph:
 That F/S of prior period were audited by the predecessor auditor;
 Type of opinion expressed by the predecessor auditor
(if the opinion was modified, the reasons therefore)
 The date of that report
.
If a material misstatement exists that affects prior period F/S on which previously unmodified
opinion was expressed, auditor shall
 Communicate with appropriate level of management and TCWG
 Request that predecessor auditor be informed.
If prior period F/S are amended, and predecessor auditor agrees to issue a new auditor’s
report on amended F/S, auditor shall report only on current period.(Ref:Para. A11)
Prior Period F/S Not Audited (Ref: 19, A13)
Auditor shall state in an Other Matter paragraph that the comparative F/S are unaudited
(However such a statement does not relieve the auditor to obtain sufficient appropriate audit
evidence that the opening balances do not contain misstatements that materially affect current
period’s F/S)
Important Paragraphs 7, 11, 13, 14, 17, A1, A3, A8, A11
ISA 720 Page 174
ISA 720 (REVISED)
Other information
Financial or non-financial information (other than F/S and auditor’s report) included in an
entity’s annual report.
Appendix 1 to this ISA contains examples of other information.
Annual report
A document, or combination of documents, prepared typically on an annual basis by
management or TCWG in accordance with law, regulation or custom, the purpose of which is
to provide owners (or similar stakeholders) with information on the entity’s operations and
the financial results and financial position as set out in the F/S. An annual report contains or
accompanies the F/S and auditor’s report thereon and usually includes information about
the entity’s developments, its future outlook and risks and uncertainties, a statement by the
entity’s governing body, and reports covering governance matters.
Law, regulation or custom may define the content of an annual report

(e.g. Sec 233 of the Companies Ordinance 1984)
Depending on law, regulation or custom in a particular jurisdiction, one or more of the

following documents may form part of the annual report:
 Management report, management commentary, or operating and financial review or
similar reports by TCWG (e.g. a directors’ report).
 Chairman’s statement.
 Corporate governance statement.
 Internal control and risk assessment reports.
Obtaining the Other Information (Ref: 13, A11-A22)
The auditor shall:

 Discuss with management to determine:
- Which document(s) comprises the annual report; and
- Entity’s planned manner and timing of the issuance of same;
 Make appropriate arrangements with management to obtain (timely and, if possible, prior
to date of auditor’s report), the final version of that document(s);and
 Request management to provide a written representation that the final version of the
document(s) will be provided to the auditor when available, and prior to its issuance by the
entity
(When some or all of the document(s) will not be available until after the date of auditor’s
report)
ISA 720 Page 175
In addition, auditor may find it 8useful to request other representations e.g:

 Management has informed the auditor of all the documents that it expects to issue that may
comprise other information;
 F/S and any other information obtained prior to date of auditor’s report are consistent
with one another, and other information does not contain any material misstatements; and
 Management intends to prepare and issue such other information and the expected timing
of such issuance.
Auditor may communicate with management or TCWG:

 The expectations in relation to obtaining final version of annual report in a timely manner
 Possible implications when other information is obtained after the date of auditor’s report.
Auditor is not precluded from dating or issuing the auditor’s report if the auditor has not
obtained some or all of the other information.
When other information is obtained after the date of auditor’s report, auditor is not required to
update the procedures performed in accordance with ISA 560
7
Reading and Considering the Other Information (Ref: 14-15, A23-A38)
The auditor shall read the other information and, in doing so shall:
10
 Consider whether there is a material inconsistency between the other information and the
F/S
- Comparing the information to the F/S.
- Comparing the words used and considering the significance of differences in wording
used
- Obtaining a reconciliation between an amount within the other information and the
F/S from management along with checking its mathematical accuracy
- Evaluating the consistency of presentation compared to F/S.
 Consider whether there is a material inconsistency between the other information and the
auditor’s knowledge obtained during the audit (e.g. a disclosure of the units produced,
information about launch of new product or business prospects and future cash flows)
- Recollection of evidence obtained & conclusions reached

- Discussions held with management or TCWG
- Reading of Board minutes
- Referring to relevant audit documentation
- Making inquires of the relevant engagement team members
ISA 720 Page 176
 Remain alert for indications that the other information not related to the F/S or auditor’s
knowledge obtained in the audit appears to be materially misstated.
- Differences between other information and the general knowledge (apart from
knowledge obtained in audit), of engagement team member reading other
information; or
- An internal inconsistency in the other information
Responding When a Material Inconsistency Appears to Exist or Other Information

Appears to Be Materially Misstated (Ref: 16, A39-A4)
Auditor shall discuss the matter with management and, if necessary, perform other
procedures to conclude whether:
 A material misstatement of the other information exists;
 A material misstatement of the F/S exists; or
 The auditor’s understanding of entity and its environment needs to be updated.
Such a discussion may:

 Include requesting management to provide support for the basis of management’s
statements in the other information.
 Provide further information that supports auditor’s conclusion
When auditor is unable to conclude that a material inconsistency no longer appears to

exist or that the other information no longer appears to be materially misstated
 He may request management to consult with qualified 3rd party
(e.g. a management’s expert or legal counsel)
 If (after considering responses from management’s consultation), auditor is still not able to
conclude; he may take following actions:
- Obtaining advice from the auditor’s legal counsel;
- Considering the implications for auditor’s report
(e.g. whether to describe the circumstances when there is a limitation imposed by
management); or
- Withdrawing from the audit
(where withdrawal is possible under law or regulation)
Misstatement of the other information

A misstatement of the other information exists when the other information is incorrectly
stated or otherwise misleading (including because it omits or obscures information
necessary for a proper understanding of a matter disclosed in the other information)
ISA 720 Page 177
Responding When the Auditor Concludes That a Material Misstatement of the Other
Information Exists (Ref: 17-19, A44-A50)
In such a case, auditor shall request management to correct other information:

 If management agrees to make the correction, the auditor shall determine that the
correction has been made; or
 If management refuses to make the correction, the auditor shall communicate the matter
with TCWG and request that the correction be made.
If other information is not corrected after communicating with TCWG, the auditor shall take
appropriate action, including:
 Considering implications for auditor’s report and communicating with TCWG about such
implication in auditor’s report; or
(In rare circumstances, a disclaimer may be appropriate when the refusal casts doubt on the
integrity of management and TCWG)
 Withdrawing from the engagement, where withdrawal is possible under applicable law or
regulation.
If auditor concludes that a material misstatement exists in other information obtained after
date of auditor’s report, the auditor shall:
 If other information is corrected, perform the necessary procedures (as listed before); or
 If the other information is not corrected after communicating with TCWG, take appropriate
action considering auditor’s legal rights and obligations, to brought the matter to the
attention of users of the auditor’s report. These actions may include
- Providing a new or amended auditor’s report to management including a modified
section in accordance with this ISA and requesting management to provide this report
to same users
- Addressing the matter in a general meeting of shareholders;
- Communicating with regulator or relevant professional body
- Considering the implications for engagement continuance
Responding When a Material Misstatement in F/S Exists or Auditor’s Understanding of

Entity etc Needs to Be Updated (Ref: 20, A51)
In such case auditor shall respond appropriately in accordance with other ISAs.
 ISA 315 for understanding of the entity and risk assessment
 ISA 450 for effect of identified and uncorrected misstatements
 ISA 560 for subsequent events
ISA 720 Page 178
Reporting (Ref: 21-24, 52-A58)
Auditor’s report shall include a separate section with a heading “Other Information”, or
other appropriate heading, when, at the date of the auditor’s report:
 Auditor has obtained, or expects to obtain, other information
(For audit of listed entity)
 Auditor has obtained some or all of the other information.
(For audit of other than listed entity)
This section shall include:

 A statement that management is responsible for the other information;
 An identification of other information:
- Obtained by auditor prior to date of auditor’s report; and
- Expected to be obtained after the date of auditor’s report
(For audit of listed entity)
 A statement that opinion does not cover other information and that the auditor is not
expressing an audit opinion or assurance;
 A description of auditor’s responsibilities relating to reading, considering and reporting on
other information; and
 When other information has been obtained prior to the date of the auditor’s report, either a
statement that:
- The auditor has nothing to report; or
- Describes uncorrected material misstatement of the other information.
When auditor expresses a qualified or adverse opinion, auditor shall consider implications of
matter giving rise to the modification of opinion for the statement required above in following
ways:
Qualified Opinion Consideration may be given as to whether the other information is also
(Material materially misstated for the same matter as, or a related matter to, the
Misstatement) matter giving rise to the qualified opinion
Qualified Opinion Auditor may need to modify the statement to refer to the inability to
(Scope Limitation) consider management’s description of the matter in other information.
Auditor is however required to report any other identified uncorrected
material misstatements.
Adverse Opinion Auditor may need to appropriately modify the statement for example, to
indicate that the other information is materially misstated for the same
matter as, or a related matter.
Disclaimer of Auditor’s report does not include a section addressing the reporting
Opinion requirements of this ISA
ISA 720 Page 179
Reporting Prescribed by Law or Regulation (Ref: 24, A59)
If auditor is required by law or regulation of a specific jurisdiction to refer to other

information in his report using a specific layout or wording, report shall refer to ISA only if it
includes, at a minimum:
 Identification of other information obtained prior to the date of auditor’s report;
 Description of auditor’s responsibilities for other information; and
 An explicit statement addressing the outcome of auditor’s work for this purpose.
Documentation (Ref: 25)

Auditor shall include in the audit documentation:
 Documentation of the procedures performed under this ISA; and
 The final version of the other information on which the auditor has performed the work
required under this ISA.
Important Paragraphs 13, 14, 16, 17-19, 21, 24 , A5,A13,A30,A31,A35,A38,A43,A51
Illustration 7 - Report of any entity when the auditor has obtained all of other information prior
to date of auditor's report and adverse opinion on consolidated F/S also affects other information

Adverse Opinion
We have audited the consolidated financial statements of ABC Company and its subsidiaries (the Group),
which comprise the consolidated statement of financial position as at December 31, 20X1, and the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion
section of our report, the accompanying consolidated financial statements do not present fairly (or do
not give a true and fair view of) the consolidated financial position of the Group as at December 31, 20X1,
and (of) its consolidated financial performance and its consolidated cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRSs).
Basis for Adverse Opinion

As explained in Note X, the Group has not consolidated subsidiary XYZ Company that the Group acquired
during 20X1 because it has not yet been able to determine the fair values of certain of the subsidiary’s
material assets and liabilities at the acquisition date. This investment is therefore accounted for on a cost
basis. Under IFRSs, the Group should have consolidated this subsidiary and accounted for the acquisition
based on provisional amounts. Had XYZ Company been consolidated, many elements in the
accompanying consolidated financial statements would have been materially affected. The effects on the
consolidated financial statements of the failure to consolidate have not been determined.
ISA 720 Page 180
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in [jurisdiction], and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our adverse opinion.
Other Information [or another title if appropriate, such as “Information Other than the Financial
Management is responsible for the other information. The other information comprises the [information
included in the X report, but does not include the consolidated financial statements and our auditor’s
report thereon.]
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. As described in the Basis for
Adverse Opinion section above, the Group should have consolidated XYZ Company and accounted for the
acquisition based on provisional amounts. We have concluded that the other information is materially
misstated for the same reason with respect to the amounts or other items in the X report affected by the
failure to consolidate XYZ Company.
Key Audit Matters

audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. In addition to the matter described
in the Basis for Adverse Opinion section we have determined the matters described below to be the key
audit matters to be communicated in our report.
Responsibilities of Management and Those Charged with Governance for Financial Statements

[The engagement partner on the audit resulting in this independent auditor’s report is [name].]
[Auditor Address]
[Date]

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ISA 700 Page 144

ISA 700 (REVISED)

Forming an Opinion on the F/S (Ref: 10-15)

 Auditor shall conclude as to whether he has obtained reasonable assurance

In particular, auditor shall evaluate whether:

Description of the Applicable Financial Reporting Framework (Ref: A10-A15)

 Auditor shall evaluate whether F/S adequately refer to or describe AFRF

Reference to More than One Financial Reporting Framework

Where F/S prepared in accordance with two FRFs. Such reference is

Form of Opinion (Ref: 16-19, A16-A17)

 When F/S prepared in accordance with compliance framework,

Auditor's Report (Ref: 20-49, A18-A69)

1 Title "Independent Auditor's Report"

2 Addressee As required by the circumstances of the engagement.

3 Auditor's  Identify entity whose F/S have been audited;

For Fair presentation framework

Use one of following phrases

For Compliance framework

“F/S are prepared, in all material respects, in accordance with AFRF”

 "... in accordance with IFRS"; or

If AFRF contains both reporting standards & legal requirements

If F/S prepared in accordance with two FRF(both applicable)

4 Basis for This section:

7 Management's  Preparation of F/S in accordance with AFRF, and

8 Auditor's This section of the report shall state that:

This section shall further:

This section also shall:

This section shall be included:

9 Other Such other reporting responsibilities may be addressed in a

In this case the auditor’s report would be having two separate

10 Name of the For Listed Companies only

Auditor's Report Prescribed by Law or Regulation (Ref: 50, A70-A75)

Supplementary Information Presented with the F/S (Ref: 53-54, A78-A84)

INDEPENDENT AUDITOR’S REPORT

Report on the Audit of the Financial Statements

Basis for Opinion

Key Audit Matters

Auditor’s Responsibilities for the Audit of the Financial Statements

Report on Other Legal and Regulatory Requirements

INDEPENDENT AUDITOR’S REPORT

Basis for Opinion

Auditor’s Responsibilities for the Audit of the Financial Statements

Illustration - Format of Report - Auditors (Reporting Obligations) Regulations 2018

INDEPENDENT AUDITOR’S REPORT

To the members of ………………… [name of company]

Report on the Audit of the Financial Statements

Material Uncertainty relating to Going Concern (if applicable)

Emphasis of Matter (if applicable)

Key Audit Matter(s)

Following are the Key audit matter(s):

[Reporting in accordance with the reporting requirements in ISA 720 (Revised)]

Responsibilities of Management and Board of Directors for the Financial Statements

Auditor’s Responsibilities for the Audit of the Financial Statements

Report on Other Legal and Regulatory Requirements

Based on our audit, we further report that in our opinion:

Scope of the ISA 701

Key Audit Matters(KAM)

Auditor shall communicate KAM in report for audits of

Determining KAM (Ref: 9-10, A9-A30)

In making this determination, auditor shall take into account:

Determining the relative significance of a matter

Communicating KAM (Ref: 11-12, A31-A33)

Introductory language in this section shall state that: