THE AUDITOR’S REPORT

CHAPTER 13
THE AUDIT REPORT

CONSIDERED THE PRIMARY

PRODUCT OF THE ASSURANCE
SERVICE
THE EVOLUTION OF THE AUDITOR’S
REPORT
 1988 SIMULATED - GAAP
 2010 PFRS
 2016 NEW AUDITORS REPORT
THE BASIC SECTIONS OF THE AUDITOR’S STANDARD REPORT
 1. Title
 2. Addressee
 3. Auditor’s Opinion
 4. Basis for Opinion
 5. Going Concern
 6. Key Audit Matters (REQUIRED FOR LISTED COMPANIES)

 [7. Emphasis of Matter Paragraphs (may also be placed after basis of opinion if auditor
finds it more appropriate)
 / Other Matter Paragraphs (may also be made part of Other reporing responsibilities if auditor
finds it more appropriate) ]

 8.Responsibilities of Management of TCWG

 9. Auditor’s responsibilities for the Audit and the Financial Statements
 10. Other Reporting Responsibilities
 11. Name of the Engagement Partner
 12.Signature of the Auditor
 13.Auditor’s Address
 14.Date of the Auditor’s Report
THE NEW AUDITOR’S REPORT

EFFECTIVE FOR AUDITS OF

FINANCIAL STATEMENTS
STARTING PERIODS ENDING
ON OR AFTER
DECEMBER 15, 2016
WHAT’S NEW IN THE NEW AUDITOR’S
REPORT
ENHANCED REPORTING ON
KEY AUDIT MATTERS GOING CONCERN: MGT
AND AUDITOR’S
RESPONSIBILITY

DISCLOSURE OF THE NAME SEPARATE SECTION WHEN

OF THE AUDIT PARTNER A MATERIAL UNCERTAINTY
EXISTS

AFFIRMATIVE STATEMENT
PRESENTATION OF THE
ON AUDITOR’S
OPINION SECTION FIRST
INDEPENDENCE

CHALLENGE TO ADEQUACY ENHANCED DESCRIPTION OF

OF DISCLOSURES AUDITOR’S RESPONSIBILITIES
KEY AUDIT MATTERS: A BACKGROUND

PROMPTED BY THE GLOBAL FINANCIAL CRISIS,

THE INVESTMENT COMMUNITY
CALLS FOR GREATER TRANSPARENCY FROM AUDITORS
TO GIVE USERS OF FINANCIAL STATEMENTS MORE
INSIGHTS ON THE FS AND ON THE AUDITOR’S ROLES

IN 2013, IN 2015,
UK AUDITORS OF SIMILAR
LISTED REQUIREMENTS
COMPANIES: WERE
REQUIRED TO INTRODUCED
DISCLOSE KEY INTO THE
RISKS AND HOW ISA
ADDRESSED
THE KEY AUDIT MATTERS

In 2015 the IAASB issued the new

ISA 701, Communicating Key
Audit Matters in the Independent
Auditor’s Report. This standard
will become applicable for all
audits of financial statements
ending on or after
15 DECEMBER 2016

COMMUNICATION OF KAM :
REQUIREMENT IN AUDITS OF LISTED COMPANIES
KEY AUDIT MATTERS

EXPECTED TO
REVOLUTIONIZE
THE AUDITOR’S
REPORT
WHAT ARE KEY AUDIT MATTERS?

MATTERS THAT IN THE

AUDITOR’S JUDGMENT
WERE OF MOST
SIGNIFICANCE IN THE FROM MATTERS
CURRENT PERIOD AUDIT: DISCUSSED WITH
TCWG
WHERE AUDITORS
FOCUSED THE MOST
 KEY AUDIT MATTERS:
DETERMINING MATTERS OF MOST SIGNIFICANCE

MATTERS WHERE MGT’S

INVOLVING MOST MATTERS SELECTION OF
COMMUNICATION DETERMINED TO AN
WITH TCWG BE IMPORTANT ACCOUNTING
TO THE USERS POLICY WAS
OF THE FS COMPLEX OR
INVOLVES
WHERE THERE ARE SUBJECTIVITY
MISSTATEMENTS MATTERS
RELATED TO THE REQUIRING AREAS WITH
MATTER THE MOST DIFFICULTY IN
AUDIT APPLYING AUDIT
EFFORT PROCEDURES OR
OBTAINING RELIABLE
AUDIT EVIDENCE
AREAS AFFECTED BY SEVERE CONTROL
DEFICIENCY
HOW TO WRITE KEY AUDIT MATTERS
KAM INCLUDES
WHY MATTER
IS
AVOID CONSIDERED
STANDARDIZED KAM
AND OVER
TECHNICAL HOW MATTER WAS
WORDS ADDRESSED IN THE
AUDIT

REFERENCE TO
RELATED
DISCLOSURES, IF ANY
FORMS OF AUDIT REPORTS
UNQUALIFIED REPORT ALSO KNOWN AS
UNMODIFIED REPORT

MODIFIED OPINIONS:

QUALIFIED
ADVERSE
AND DISCLAIMER OF OPINION
UNQUALIFIED OPINION

FAIRLY STATED IN ALL MATERIAL

RESPECTS
QUALIFIED OPINION

EFFECT OF A CERTAIN
MISSTATEMENT, OR
INABILITY TO GATHER
EVIDENCE , IS
MATERIAL BUT NOT
PERVASIVE
ADVERSE OPINION

EFFECT OF MISSTATEMENT
IS BOTH MATERIAL AND
PERVASIVE
ADDITIONAL PARAGRAPHS TO THE
AUDITOR’S REPORT
EMPHASIS OF MATTER OTHER MATTER
PARAGRAPH PARAGRAPH

* MATTER OTHER THAN

THOSE PRESENTED OR
* MATTER APPROPRIATELY
DISCLOSED IN THE FS
PRESENTED OR DISCLOSED IN
THE FS
*RELEVANT TO USERS’
UNDERSTANDING OF THE
* FUNDAMENTAL TO USERS’
AUDIT, AUDITOR’S
UNDERSTANDING
RESPONSIBILITIES AND
AUDITOR’S REPORT
EMPHASIS OF MATTER PARAGRAPH
WHEN USED
FINANCIAL REPORTING FRAME
WORK PRESCRIBED BY LAW OR ALERT USERS THAT FS IS
REGULATION WOULD INACCORDANCE WITH
UNACCEPTABLE BUT FOR THE SPECIAL PURPOSE
FACT THAT IT IS PRESCRIBED BY FRAMEWORK
LAW

WHEN FACT S BECOME

IN CASE OF
KNOWN TO THE AUDITOR
SIGNIFICANT
AFTER THE DATE OF THE
UNCERTAINTY
AUDITOR’S REPORT AND THE
(OTHER THAN A GOING
AUDITOR PROVIDES A NEW
CONCERN PROBLEM)
OR AMENDED AUDIT REPORT

UNCERTAINTIES ABOUT ENTITIES ABILITY TO EARLY APPLICATION OF

CONTINUE AS A GOING CONCERN A NEW STANDARD
AUDITOR’S RESPONSIBILITY:
UNCERTAINTIES ABOUT THE ENTITIES ABILITY
TO CONTINUE AS A GOING CONCERN

OBTAIN SUFFICIENT
CONCLUDE WHETHER A
EVIDENCE ON THE
MATERIAL
APPROPRIATENESS OF
UNCERTAINTY EXISTS
MANAGEMENT’S USE OF THE
ABOUT THE ENTITY’S
GOING CONCERN BASIS OF
ABILITY TO CONTINUE
ACCOUNTING IN THE FS
AS A GOING CONCERN
PREPARATION
AUDITOR’S RESPONSIBILITY: GOING
CONCERN
IFTERI
EVENTS OR CONDITIONS POINTS TO SIGNIFICANT UNCERTAINY
VS. AUDIT EVIDENCE SHOWS NO MATERIAL UNCERTAINTY:

AUDITOR EVALUATES IF ADEQUATE DISCLOSURES HAVE BEEN MADE

ABOUT THE EVENTS AND CONDITIONS

IF ADEQUATE DISCLOSURE IS MADE:

EXPRESS AN UNMODIFIED OPINION BUT AUDIT REPORT INCLUDES A
SECTION “MATERIAL UNCERTAINTY RELATED TO GOING CONCERN”

IF ADEQUATE DISCLOSURE IS NOT MADE:

EXPRESS A QUALIFIED OR ADVERSE OPINION AS APPROPRIATE

IF FS ARE PREPARED USING THE GOING CONCERN BASIS AND

AUDITOR’S JUDGMENT INDICATES IT’S INAPPRORIATE

AUDITOR EXPRESSES AN ADVERSE OPINION

AUDITOR’S RESPONSIBILITY:
GOING CONCERN

IF THERE IS SIGNIFICANT DELAY IN THE APPROVAL OF THE FS BY

TCWG AFTER THE DATE OF THE FS:

AUDITOR INQUIRES ON THE REASONS

IF DELAY IS RELATED TO GOING CONCERN ASSESSMENT,

AUDITOR SHALL PERFORM ADDITIONAL PROCEDURES AND

CONSIDER EFFECT ON AUDITOR’S CONCLUSION REGARDING THE
EXISTENCE OF A MATERIAL UNCERTAINTY
INABILITY TO OBTAIN SUFFICIENT
APPROPRIATE EVIDENCE

SCOPE ALTERNATIVE
LIMITATION PROCEDURES

NOT ACCEPT UNLESS

REQUIRED BY STATUTE;
OTHERWISE DECIDE
WHETHER TO QUALIFY OR
DISCLAIM
RELATIONSHIP BETWEEN EMPHASIS OF MATTER
PARAGRAPH AND THE KEY AUDIT MATTER

MATTERS THAT ARE KAM MAY ALSO BE

FUNDAMENTAL TO USERS’
UNDERSTANDING OF THE FINANCIAL
STATEMENTS, IN COMMUNICATING THE
KAM, THE AUDITOR MAY HIGHLIGHT OR
DRAW FURTHER ATTENTION TO ITS
RELATIVE IMPORTANCE; OR BY PRESENTING
IT MORE PROMINENTLY UNDER THE KAM
COMPARATIVE INFORMATION

ONLY CERTAIN
PRIOR PERIOD
FIGURES OR
COMPARATIVE
DISCLOSURES ARE
FIGURES
INTEGRAL PART
OF CURRENT FS

ENTIRE PRIOR PERIOD

COMPARATIVE FINANCIAL
FINANCIAL STATEMENTS ARE
STATEMENTS PRESENTED AS
COMPARATIVE
FIGURES
PRIOR PERIOD FS

NOT AUDITED:
AUDITED BY
PREDECESSOR
State in other matter
AUDITOR:
paragraph
State in other matter
paragraph
CONSOLIDATED FS VS.
COMBINED FS OR GROUP FS

CONSOLIDATED FS:

THE COMBINED FS
BETWEEN PARENT COMBINED OR GROUP FS:
AND SUBSIDIARY
FS OF SEVERAL ENTITIES
WITH COMMON CONTROL
BUT NO PARENT COMPANY
AUDITS OF GROUP FINANCIAL
STATEMENTS: TERMINOLOGIES

COMPONENT:
COMPONENT AUDITOR
AN ENTITY OR BUSINESS
ACTIVITY FOR WHICH GROUP OR ONE WHO AUDITS THE
COMPONENT MANAGEMENT COMPONENT FOR THE
PREPARES FINANCIAL GROUP AUDIT
INFORMATION THAT SHOULD
INCLUDED IN THE GROUP FS.

COMPONENT MANAGEMENT:

ONE RESPONSIBLE FOR THE

FS OF THE COMPONENT
 AUDITS OF GROUP FS
GROUP: GROUP AUDIT: GROUP OPINION:
OPINION ON THE
REFERS TO ALL REFERS TO THE GROUP FINANCIAL
COMPONENTS AUDIT OF GROUP STATEMENTS
FS

GROUP ENGAGEMENT PARTNER GROUP MANAGEMENT:

MGT RESPONSIBLE FOR
GROUP ENGAGEMENT TEAM PREPARING GROUP FS

GROUP FINANCIAL STATEMENTS:

COMBINED FS AGGREGATING FINANCIAL INFO OF
COMPONENTS WITHOUT PARENT COMPANY BUT WITH
COMMON CONTROL

SIGNIFICANT COMPONENT: A COMPONENT IDENTIFIED BY THE GRP

ENGAGEMENT TEAM AS ONE WITH FINANCIAL SIGNIFICANCE
AUDIT OF GROUP FS

GRP ENGAGEMENT PARTNER IS

RESPONSIBLE FOR THE DIRECTION,
SUPERVISION AND PERFORMANCE OF
THE GROUP AUDIT ENGAGEMENT
USING THE WORK OF AN AUDITOR’S
EXPERT

AUDITOR HAS SOLE

RESPONSIBILITY FOR THE
AUDIT OPINION EXPRESSED
AND THIS IS NOT REDUCED BY
THE AUDITOR’S USE OF AN
AUDITOR’S EXPERT.
INITIAL AUDIT ENGAGEMENTS-OPENING
BALANCES
SITUATION AUDIT REPORT
UNABLE TO OBTAIN SUFFICIENT QUALIFIED OR DISCLAIMER OF
APPROPRIATE AUDIT EVIDENCE ON OPINION
OPENING BALANCES
OPENING BALANCES CONTAIN
MISSTATEMENTS WITH MATERIAL QUALIFIED OPINION OR ADVERSE
EFFECT ON CURRENT FS OPINION

INCONSISTENT APPLICATION OF QUALIFIED OPINION OR ADVERSE

ACCOUNTING POLICIES OPINION

PRIOR PERIOD AUDITOR GAVE A MODIFY THE OPINION AS

SUBSEQUENT EVENTS

ADJUSTING EVENTS NON ADJUSTING

EVENTS
DUAL DATED AUDIT REPORTS

HAPPENS WHEN AN AUDITOR

DISCOVERS A FINANCIAL EVENT
THAT OCCURRED AFTER THE
INITIAL REPORT DATE AND DOES
NOT WANT TO TAKE
RESPONSIBILITY FOR ANY OTHER
POST REPORT OCCURENCIES
OTHER THAN THAT SPECIFIC
EVENT. RATHER THAN REVISE
THE REPORT, THE AUDITOR ADDS
AND DATES A FOOTNOTED
DISCLOSURE TO INITIAL REPORT
RE-ISSUED FINANCIAL STATEMENTS

HAPPENS WHEN AFTER FS IS

FILED WITH SEC OR OTHER
AGENCIES, EVENTS MIGHT
HAVE OCCURRED
REQUIRING DISCLOSURE,
THAT WARRANTS A
REISSUANCE OF FS TO KEEP
THEM FROM BEING
MISLEADING
OTHER REPORTING CONSIDERATIONS

OFERRING
SECURITIES TO OTHER
THE PUBLIC: INFORMATION IN
DOCUMENTS
CONSIDER LEGAL CONTAINING
AND RELATED AUDITED FS
REQUIREMENTS

ACCESS
CONSIDERATION TO
OF OTHER OTHER
INFO SUPPLEMENTARY
INFORMATION:
INFORMATION
NOTE MATERIAL
PRESENTED WITH
INCONSISTENCIES
FINANCIAL
AND SEE NEED FOR
STATEMENTS
AMENDMENT
END OF CHAPTER 13
THE AUDIT REPORT