INDEPENDENT

AUDITOR’S
REPORT
By: ATTY. PETER JAY S. GENISTON, CPA
 TYPES OF AUDITOR’S OPINIONS
❑ UNMODIFIED / UNQUALIFIED OPINION – The opinion
expressed when the financial statements are prepared, in
all material respects, in accordance with the applicable
Financial Reporting Framework.
❑ MODIFIED OPINION – The three (3) types are:
1. QUALIFIED OPINION – the auditor is satisfied that the
FSs are presented fairly, except for a specific aspect of
them.
2. ADVERSE OPINION - the auditor does not believe the FSs
are fairly presented
3. DISCLAIMER OF OPINION - the auditor does not know if
the FSs are presented fairly
 TYPES OF AUDITOR’S OPINIONS

MATERIAL BUT MATERIAL AND

NATURE / PARTICULARS
NOT PERVASIVE PERVASIVE
FSs are materially misstated QUALIFIED ADVERSE
Inability to obtain sufficient appropriate audit
evidence (Scope Limitation):
RESIGN (if
a. Due to Management imposed Limitation QUALIFIED appropriate) or
DISCLAIMER
b. Other limitations QUALIFIED DISCLAIMER
 PERVASIVE EFFECTS ON THE FS are those
that, in the AUDITOR’S JUDGMENT:

1. Are not confined to specific elements, accounts or items of

the FSs;
2. If so confined, represent or could represent a substantial
proportion of the FSs; or
3. In relation to disclosures, are fundamental to users‘
understanding of the FSs.
 BASIC SECTIONS OF THE AUDITOR’S REPORT
1. TITLE: INDEPENDENT AUDITOR’S REPORT
2. ADDRESSEE: should be addressed as required by the
circumstances of the engagement.
CLIENT ENTITY ADDRESSEE OF THE AUDIT REPORT
Incorporated Entity The BOD or stockholders or both if the dual address is preferred. The Audit Report
may instead be addressed to the President and the BOD, but is not addressed
only to an officer because it might be construed as being intended only for
his/her information, not for the BOD, the lawful governing body.
Partnership The partners and the firm or to the firm.
Unincorporated Joint The participants
Venture
Proprietorship The proprietor
Outside Party If the auditor was engaged by an outside party (for example, prospective
investor, creditor, single stockholder or court of law) the Audit Report is
addressed to the engaging party.
 BASIC SECTIONS OF THE AUDITOR’S REPORT
3. AUDITOR’S OPINION: First SECTION of the report which
shall contain the auditor’s opinion and also the following:
a. Identify the entity whose financial statements have been audited;
b. State that the financial statements have been audited;
c. Identify the title of each statement comprising the financial
statements;
d. Refer to the notes, including the summary of significant accounting
policies; and
e. Specify the date of, or period covered by, each financial statement
comprising the financial statements.

In our opinion, the accompanying financial statements present fairly,

in all material respects, ---- in accordance with (the applicable
financial reporting framework).
 BASIC SECTIONS OF THE AUDITOR’S REPORT
4. BASIS FOR OPINION: Directly follow the Opinion Section
and shall also include the following -
a. State that the audit was conducted in accordance with PSA;
b. Refer to the section of the Auditor’s Report that describes the
Auditor’s Responsibilities under the PSAs;
c. Include 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;
d. State 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.
 BASIC SECTIONS OF THE AUDITOR’S REPORT
5. GOING CONCERN: The auditor shall evaluate whether
sufficient appropriate audit evidence has been obtained
regarding, and shall conclude on, the appropriateness of
management’s use of the going concern basis of
accounting in the preparation of the financial statements.
 BASIC SECTIONS OF THE AUDITOR’S REPORT

6. KEY AUDIT MATTERS – are selected from matters which

are communicated with those charged against governance.
Three (3) matters which requires the auditor to take into account
when making this determination:
a. Areas which were considered to be susceptible to higher risks of
material misstatement or which were deemed to be ‘significant
risks’
b. Significant auditor judgments in relation to areas of the financial
statements that involved significant management judgment.
c. The effect on the audit of significant events or transactions that
have taken place during the period.
 BASIC SECTIONS OF THE AUDITOR’S REPORT

7. RESPONSIBILITIES OF MANAGEMENT AND THOSE

CHARGED WITH GOVERNANCE FOR THE FINANCIAL
STATEMENTS –

a. Preparing the FS in accordance with the applicable financial

reporting framework, 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; and
b. Assessing the 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, if applicable, matters relating to
going concern.
 BASIC SECTIONS OF THE AUDITOR’S REPORT

8. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE

FINANCIAL STATEMENTS -

❑ This section shall state the objectives of the auditor:

a. Obtain reasonable assurance about whether the financial

statements as a whole are free from material misstatements,
whether due to fraud or error; and
b. Issue an auditor’s report that includes the auditor’s opinion
 BASIC SECTIONS OF THE AUDITOR’S REPORT
8. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS -
❑ Shall further state that:
a. As part of an audit in accordance with PSAs, the auditor exercises
professional judgment and maintains professional skepticism
throughout the audit;
b. Describe an audit by stating that the auditor’s responsibilities are:
➢ To identify and assess the risks of material misstatement of the FS; to design and
perform audit procedures responsive to those risks; and to obtain audit evidence
that is sufficient and appropriate to provide a reasonable basis for the auditor’s
opinion
➢ To obtain an understanding of internal control relevant to the audit
➢ To evaluate appropriateness of management’s use of the going concern basis of
accounting
➢ To evaluate the overall presentation, structure and content of the financial
statements, including the disclosures
 BASIC SECTIONS OF THE AUDITOR’S REPORT

9. OTHER REPORTING RESPONSIBILITIES

❑ With a heading titled ‘REPORT ON OTHER LEGAL AND

REGULATORY REQUIREMENTS’

10.NAME OF THE ENGAGEMENT PARTNER

11.SIGNATURE OF THE AUDITOR

12.AUDITOR’S ADDRESS

13.DATE OF THE AUDITOR’S REPORT

 MODIFICATIONS TO AUDITOR’S REPORT

❑ Provides ‘Modified Auditor’s Opinion’

❑ Adds “Emphasis of Matter” Paragraph

❑ Includes “Other Matter Paragraph”

 ADDITIONAL PARAGRAPHS TO THE
AUDITOR’S REPORT:

❑ EMPHASIS OF MATTER PARAGRAPH – is a paragraph

included that refers to a matter appropriately presented or
disclosed in the financial statements that, in the auditor’s
judgment, is of such importance that it is fundamental to
users’ understanding of the financial statements.

❑ OTHER MATTER PARAGRAPH – is a paragraph included that

refers to a matter other than those presented or disclosed
in the financial statements that in the auditor’s judgment, is
relevant to users’ understanding of the audit, the auditor’s
responsibilities or the auditor’s report.
 EMPHASIS OF MATTER PARAGRAPH
❑ When the auditor includes an ‘Emphasis of Matter’
paragraph in the Auditor’s Report, the auditor shall:
a. Include it immediately after the opinion paragraph
b. Use the heading ‘Emphasis of Matter’, or other appropriate heading
c. Include in the paragraph a clear reference to the matter being
emphasized and to where relevant disclosures that fully describe
the matter can be found in the FSs; and
d. Indicate that the auditor’s opinion is not modified in respect of the
matter emphasized