THE AUDIT REPORT

OBJECTIVES OF THE AUDITOR:

 Form an opinion on the financial statements
based on a evaluation of the conclusions
drawn from the audit evidence obtained; and

 Express clearly that opinion through a

written report that also describes the basis
for the opinion.
APPLICABLE FINANCIAL
REPORTING FRAMEWORK
 Fair presentation framework
 Compliance Framework
FAIR PRESENTATION
FRAMEWORK
 Used to refer to a financial reporting
framework that requires compliance with the
requirements of the framework and :
 Acknowledges explicitly or implicitly that, to
achieve fair presentation of the financial
statements, it may be necessary for management
to provide disclosures beyond those specifically
required by the framework; or
 Acknowledges explicitly that it may be necessary
for management to depart from a requirement of
the framework to achieve fair presentation of
the financial statements.
COMPLIANCE FRAMEWORK
 Used to refer to a financial reporting
framework that requires compliance with the
requirements od the framework, but does
not contain the acknowledgements in items 1
and to on “Fair presentation framework”
BASIC SECTIONS OF THE
AUDITOR’S STANDARD REPORT
 Title
 Addressee
 Auditor’s Opinion
 Basis for Opinion
 Going Concern
 Key Audit Matters (KAM)
 Responsibilities of Management and Those Charge with
Governance
 Auditor’s Responsibilities for the Audit of the Financial Statements
 Other Reporting Responsibilities
 Name of the Engagement Partner
 Signature of the Auditor
 Auditor’s Address
 Date of Auditor’s Report
ADDRESSEE
Client Entity Addressee of the Audit Report
Incorporated entity The board of directors or
stockholders
The president and the board of
directors.
Partnership The partners and the firm or to
the firm
Unincorporated joint venture The participants
Proprietorship The proprietor
Outside party The audit report is addressed to
engaging party.
AUDITOR’S OPINION
 Identify the entity whose financial
statements have been audited;
 State that the financial statements have
been audited
 Identify the title of each statement
comprising the financial statements
 Refer to the notes including the summary of
significant accounting policies
 Specify the date of, or period covered by,
each financial statement comprising the
financial statements
BASIS FOR OPINION
 State that the audit was conducted in accordance
with PSA
 Refer to the section of the auditor’s report that
described the auditor’s responsibilities under the PSAs
 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.
 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.
KEY AUDIT MATTERS
 For audits of complete sets of general
purpose financial statements of listed
entities, the auditor shall communicate key
audit matters in the auditor’s report in
accordance with PSA 701.
MATTERS WHICH PSA REQUIRES THE
AUDITOR TO TAKE INTO ACCOUNT
WHEN MAKING THE DETERMINATION OF
KAM
 Areas which were considered to be susceptible
to higher risks of material misstatement or
which were deemed to be significant risks in
accordance with PSA 315.

 Significant auditor judgements in relation to

areas of the financial statements that involved
significant management judgement.

 The effect on the audit off significant events or

transactions that gave taken place during the
period.
RESPONSIBILITIES OF MANAGEMENT
AND THOSE CHARGE WITH
GOVERNANCE
 Preparing financial statements in accordance
with the applicable financial reporting
framework.
 Assessing the ability to continue as 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
AUDITOR’S RESPONSIBILITIES FOR THE
AUDIT OF THE FINANCIAL STATEMENTS
 This section states the objective of the
auditor; and
 The auditor’s responsibilities shall further
state that:
 As part of an audit in accordance with PSA, the
auditor exercises professional judgement and
maintains professional skepticism throughout the
audit;
 Describe an audit by stating that the auditor’s
responsibilities.
OTHER REPORTING
RESPONSIBILITIES
 If the auditor addresses other reporting
responsibilities in the auditor’s report on the
financial statements that are in addition to
the auditors’ responsibilities under the PSAs,
these other reporting responsibilities shall be
addressed in a separate section in the
auditor’s report.
DATE OF AUDITOR’S REPORT
 The auditor’s report shall be dated no earlier
that the date on which the auditor has
obtained sufficient appropriate evidence in
which to base the auditor’s opinion on the
financial statements.
FORMS OF AUDIT REPORT
 Unqualified opinion
 Qualified opinion
 Adverse opinion
 Disclaimer of opinion
UNQUALIFIED OPINION
 An unqualified opinion implies that auditor is
satisfied that the financial statements
present fairly, in all material respects, an
entity’s financial position, results of
operations, and cash flows in conformity with
generally accepted accounting principles.
QUALIFIED OPINION
 The effect of the material misstatement,
individually or in the aggregate, or due to
inability of the auditor to obtain sufficient
appropriate audit evidence are material, but
not pervasive, as to require an adverse
opinion or a disclaimer of opinion.
ADVERSE OPINION
 Expressed when the effect of a misstatement
is both material and pervasive to the
financial statements that the auditor
concludes that a qualification of the report is
not adequate to disclose the misleading or
incomplete nature of the financial
statements.
DISCLAIMER OF OPINION
 Expressed when the possible effect of an
auditor’s inability to obtain sufficient
appropriate audit evidence us both material
and pervasive.
 The auditor concludes that , notwithstanding
having obtained sufficient appropriate audit
evidence regarding each of the individual
uncertainties, it is not possible to form an
opinion on the financial statements due to
potential interaction of uncertainties and
their possible cumulative effect on the
financial statements.
ADDITIONAL PARAGRAPHS TO
THE AUDITOR’S REPORT
 Emphasis of Matter Paragraph
 Other Matter Paragraph
EMPHASIS OF MATTER
PARAGRAPH
 It is a paragraph included n the auditor’s
report that refers to a matter appropriately
presented or disclosed in the financial
statements that, in the auditor’s judgement,
is of such importance that is fundamental to
user’s understanding of the financial
statements and provided that:
 The auditor would not be required to modify
opinion in accordance with PSA 705.
 When PSA 701 applies the matter has not been
determined to be a key audit matter to be
communicated in the auditor’s report.
OTHER MATTER PARAGRAPH
 It is a paragraph included in the auditor’s
report that refers to a matter other than
those presented in the financial statements
that , in the auditor’s judgement, is relevant
to user’s understanding of the audit, the
auditor’s responsibilities of the auditor’s
report.
MATERIAL MISSTATEMENT/
DEPARTURE FROM PFRS
 Inappropriate accounting policy selected;
 Misapplication of selected accounting policy;
or
 Inappropriate or inadequate disclosure.
SCOPE LIMITATION
 Scope limitation arises when the auditor is
unable to perform necessary audit procedures
required try PSA or the auditor is unable to,
obtain sufficient appropriate evidence about
an assertion because of the restrictions
imposed by the management or because of
limitations brought about by the
circumstances.
Failure to obtain sufficient appropriate
evidence will cause the auditor to:

 Express a qualified opinion if the effect is

material but not pervasive; or
 If the effect is both material and pervasive,
the auditor may resign from the engagement
or disclaim an opinion on the financial
statements.
A. OPINION SECTION
Qualified Opinion Due to Material
Misstatement
use the heading "Qualified Opinion" in the
opinion section of the report; and
statethat, in the auditor's opinion, except for
the effects of the matter described in the Basis
for Qualified Opinion section, the financial
statements present fairly, in all material
respects, the financial position and financial
performance of the entity in accordance with
the applicable financial reporting framework.
Qualified Opinion Due to Scope Limitation
use the heading "Qualified Opinion" in the
opinion section of the report; and

state that, in the auditor's opinion, except for the

possible effects of the matter described in the
Basis for Qualified Opinion section, the financial
statements present fairly, in all material respects,
the financial position and financial performance
of - the entity in accordance with the applicable
financial reporting framework:
Adverse Opinion

 use the heading "Adverse Opinion" in the

opinion section of the report; and

 state that, in the auditor's opinion, because

of the significance of the matter described in
the Basis for Adverse Opinion section, the
financial statements do not present fairly the
financial position and financial performance
of the entity in accordance with the
applicable financial reporting framework.
Disclaimer of Opinion

 use the heading "Disclaimer of Opinion" in the opinion

section of the report;
 state that the auditor does not express an opinion on
the financial statements;
 state that because of the significance of the matter
described in the Basis for Disclaimer of Opinion
section, the auditor has not been able to obtain
sufficient appropriate audit evidence to provide a basis
for an audit opinion on the financial statements; and
 amend the opening statement which indicates that the
auditor has audited the financial statements, to state
that the auditor was engaged to audit the financial
statements.
B. BASIS FOR OPINION
Material Misstatement (Qualified or Adverse Opinion)

 A description of the nature of misstatements; and

 A quantification of the financial effects of the
misstatement or a disclosure of omitted information, if
practicable.

Omission of narrative disclosure (Qualified or

Adverse Opinion)
 Describe the nature of the omitted information in the
 Basis for Opinion section of the report; and
 Include the omitted information, if practicable.
Scope Limitation (Qualified or Disclaimer of
Opinion)

 If the modification results from inability to

obtain sufficient appropriate audit evidence,
the basis for opinion section shall only
explain the reason for that inability.
C. AUDITOR'S RESPONSIBILITY .
If the auditor disclaims an opinion on the financial
statements, the Auditor's Responsibility section should
be modified to include only the following statements:
 that the auditor's responsibility is to conduct an audit
of financial statements in accordance with PSA and
to issue an auditor's report;
 that because of the matter described in the Basis for
Disclaimer of Opinion section, the auditor was not
able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion on the financial
statements; and
 that the auditor is independent of the entity and the
auditor has fulfilled his ethical responsibilities.
GOING CONCERN
 Going Concern Assumption is Appropriate and
No Material Uncertainty Exists
 theauditor's report should have a separate
section with a heading "Going Concern" stating
specifically that no material uncertainties exist.
 Going Concern Appropriate- Material
Uncertainty Exists
 theauditor should issue a report that contains'
an unmodified opinion with a separate section
"Material Uncertainty Related to Going Concern"
 Going Concern Assumption Inappropriate
 the
auditor's report on the financial statements
must contain an adverse opinion.
KEY AUDIT MATTERS
 Key audit matters are those matters that, in
the auditor's professional judgment, were of
most significance in the audit of the financial
statements of the current period.
EMPHASIS OF MATTER AND
OTHER MATTER PARAGRAPHS
 An emphasis of matter paragraph is included
in the audit report to draw the readers'
attention to a matter presented or disclosed
in the financial. statements that, in the
auditor's judgment, is of such importance
that it is fundamental to the readers'
understanding of the financial statements.
OTHER MATTER PARAGRAPH
 There are instances when the auditor
considers it necessary to communicate a
matter that is not presented or disclosed in
the financial statements but, in the auditor's
judgment, is relevant to users' understanding
of the audit, the auditor's responsibilities or
the auditor's, report.
OTHER MATTER PARAGRAPH
 Circumstances which require Other Matter
paragraph include:
 Reporting on comparative information
 Financial statements prepared using more
than one financial frameworks.
 Limiting the use of the auditor's report.
 Subsequent discovery of facts.
REPORTING ON COMPARATIVE
INFORMATION
 Comparative Financial Statements where amounts
and other disclosures for the preceding period are
included for comparison with the financial
statements of the current period, but do not form
part of the current period financial statements.

 Corresponding- Figures where amounts and other

disclosures for the preceding period are included
as part of the current period financial
statements, and are intended to be read in
relation to the amounts and other disclosures
relating to the current period.
REPORTING ON COMPARATIVE
FINANCIAL STATEMENTS
 Prior Period Financial Statements audited by a
continuing auditor
 re-expressing the. opinion originally issued; or
 expressing an opinion different from the one
originally issued.

 "Other Matter" paragraph stating:

 the fact that the updated report is different
fromthe previous opinion;
 the date of the prior year's report;
 the type of opinion previously issued, and
 the reasons for changing the auditor's opinion
PRIOR PERIOD FINANCIAL STATEMENTS
AUDITED BY ANOTHER AUDITOR
 The predecessor auditor reissues the audit
report on the prior period financial
statements. :
 Comparing the current period financial
statements with the financial statements audited
 A discussion with the successor auditor about any
circumstances or events that may affect the
financial statements of the prior period.
 Obtaining a letter of representation from the
successor auditor
PRIOR PERIOD FINANCIAL STATEMENTS
AUDITED BY ANOTHER AUDITOR
 The successor auditor's report on the current
year's financial statements should include
Other Matter paragraph stating.
 The fact that the prior period financial
statements were audited by another auditor
 The date of the predecessor auditor’s report
 The type of opinion issued by the predecessor
auditor and if the opinion is modified, the
reasons therefore.
PRIOR PERIOD FINANCIAL
STATEMENTS NOT AUDITED
 When the prior period financial statements
are not audited, the auditor should state in
the report on the current year's financial
statements that the comparative financial
statements are unaudited.
 When the comparatives are presented as
corresponding figures, the auditor should
issue a report that refers only to the
financial statements of the current period.
FINANCIAL STATEMENTS PREPARED USING MORE
THAN ONE
FINANCIAL FRAMEWORKS
 If the auditor has determined that the
frameworks are acceptable in the respective
circumstances, the auditor may include an
"Other Matter" paragraph in the auditor's
report, referring to the fact that another set
of financial statements have been prepared
by the same entity in accordance with
another general, purpose framework and
that the auditor has issued a report on those
financial statements.
LIMITING THE USE OF THE
AUDITOR'S REPORT
 The auditor may consider it necessary in the
circumstances to include an "Other Matter"
paragraph, stating that the auditor's report is
intended solely for specific group of users,
and should not be distributed to or used by
other parties.
OTHER INFORMATION ACCOMPANYING
AUDITED FINANCIAL STATEMENTS
 Auditor's responsibility regarding other
information
 Auditors are not required to perform any audit
procedures to corroborate other information
included in the annual report to shareholders.
 PSA 720, however, requires the auditor to read
the other information to consider:
 Whether material inconsistencies exist between the
other information and the financial statements; and
 Whether material inconsistency exists between the
other information and the auditor's knowledge of the
entity obtained in the audit.
MATERIAL INCONSISTENCY
 The audited financial statements need to be
amended;
 The other information needs to be amended;
or
 The auditor's understanding of the entity
needs to be updated.
MATERIAL MISSTATEMENT OF
FACT
 If the auditor concludes that there is a
material misstatement of fact in the other
information and the management refuses to
correct the other information, the auditor
should notify the audit committee of the
auditor's concern regarding the other
information and if necessary, obtain legal
advice.
AUDIT OF GROUP FINANCIAL
STATEMENTS
 The auditor should consider whether his own
participation is sufficient to be able to act as
the group auditor who will express an opinion
on group financial statements. This
consideration involves assessment of :
 the materiality of the portion of the financial
statement audited;
 the auditor's knowledge of the overall financial
statements; and
 the importance of the component(s) audited by
another auditor.