Reporting: ISA 700, 705 & 706

2. Amin Siddiki FCA
Understanding the basic
Auditor is duty bound to express his opinion on financial
statements in a written report whether financial statements
are giving true and fair view of the business. If they do, the
auditor expresses an unmodified opinion.

3. Amin Siddiki FCA
Title
Auditor’s report must bear clear title that indicates that it is a report from an
auditor. For example; “Independent Auditor’s Report”.
Addressee
Addressee are the audience to whom report is meant to be served. For
example; shareholders.

4. Amin Siddiki FCA
Introductory paragraph:
This paragraph conveys some basic important facts regarding financial
statements which are:
1. Name of the entity whose financial statements are audited
2. Clear statement that financial statements have been audited
3. Title of financial statements that comprise complete set of financial
statements
4. Summary of important policies and other explanatory information which
may or may not form part of complete set of financial statements.
5. Clearly mentioning the time period covered by the financial statements
that are audited

5. Amin Siddiki FCA
Management’s responsibility for the financial statements
Report is required to describe that is management who is responsible to
prepare financial statements and to implement internal control system to
assist management in preparing financial statements that are free from
material misstatements.

6. Amin Siddiki FCA
Auditor’s responsibility
The responsibility of auditor is to express an opinion the financial statements
prepared by the management.
While describing what auditor’s responsibility includes, he must clarify that:
1. Audit is application of procedures to obtain evidence about amounts and
information disclosed in the financial statements
2. The selection of procedures is a result of auditor’s judgment considering the
circumstances of engagement
3. Audit includes evaluation of:
a. Appropriateness of policies selected and applied
b. Reasonableness of accounting estimates
c. Overall presentation of financial statements
The auditor’s report must also include the statement if auditor believes that as a
result of audit procedures applied, sufficient appropriate audit evidence has been
obtained and the same can be used as basis for auditor’s opinion.

7. Amin Siddiki FCA
Auditor’s opinion
Auditor’s report must include this section with the same heading and while
expressing unmodified opinion auditor may use any of the following phrases:
Signature of the auditor
Date of auditor’s report
Auditor’s address

8. Amin Siddiki FCA
The auditor shall express an unmodified opinion if:
Auditor concludes that financial statements are prepared, in all material
respects, in accordance with applicable financial reporting framework.
Or
Financial statements are giving true and fair view of the business.

9. Amin Siddiki FCA
The auditor shall give modified opinion if:
1. Audit evidence obtained makes auditor conclude that financial
statements are not free from material misstatements; or
2. Auditor is unable to obtain sufficient appropriate audit evidence
whether financial statements are free from material misstatements.
For modified opinion auditor is required to follow guidelines of ISA
705.

10. Amin Siddiki FCA
What is modified opinion?
An opinion in the auditor’s report is said to be modified if it is:
• Qualified opinion – a conditional opinion also known as “except for” opinion. An
opinion according to which except for certain aspect of financial statement
everything else is true and fair.
• Adverse opinion – an opinion in which auditor declares that financial statements
as a whole are not giving true and fair view.
• Disclaimer of opinion – It is not really an opinion rather a statement that no
opinion can be formed due to absence of sufficient appropriate audit evidence.

11. Amin Siddiki FCA
Nature of Matter Giving
Rise to the Modification
Financial statements are
materially misstated
Inability to obtain
sufficient appropriate
audit evidence
Auditor’s Judgment about the Pervasiveness of the
Effects or Possible Effects on the Financial
Statements
Material but Not
Pervasive
Qualified Opinion
Qualified Opinion
Material and Pervasive
Adverse Opinion
Disclaimer of Opinion

12. Amin Siddiki FCA
Qualified opinion
The auditor shall express a qualified opinion if:
 Based on the audit evidence obtained auditor concludes that misstatements in
the financial statements are material but not pervasive individually or in
aggregate.
 Auditor is unable to gather sufficient appropriate audit evidence to form basis of
conclusion however, he concludes that undetected misstatements could be
material but not pervasive.

13. Amin Siddiki FCA
If auditor thinks that a matter disclosed or presented in the financial statements is
of importance for users’ understanding and needs to be highlighted then auditor
includes emphasis of matter paragraph in the auditor’s report
In rare cases if a matter other than those presented or disclosed in the financial
statements is important in the eyes of auditor for better understanding users
regarding audit engagement then auditor shall add other matter paragraph
Emphasis of matter paragraph

14. Amin Siddiki FCA
Auditor adds emphasis of matter paragraph in the auditor’s report
pertaining to matter that is already adequately disclosed or presented in
the financial statement and in auditor’s judgment it is necessary to bring
the matter to user’s attention and thus emphasizing it by referring to that
matter in the financial statements.
The inclusion of an Emphasis of Matter paragraph in the auditor’s report does not affect
the auditor’s opinion. An Emphasis of Matter paragraph is not a substitute for either:
>> The auditor expressing a qualified opinion or an adverse opinion, or disclaiming an
opinion, when required by the circumstances of a specific audit engagement

15. Amin Siddiki FCA
On the other hand auditor adds other matter paragraph in
the auditor’s report pertaining to matter other than those
presented or disclosed in the financial statements and in
auditor’s judgment it is necessary to bring the other matter to
user’s attention by giving necessary details.

16. Amin Siddiki FCA
In short the purpose of both paragraphs is to draw user’s
attention that can help understand financial statements better.
Only distinguishing factor is the matters already disclosed
in the financial statements.

17. Amin Siddiki FCA
Thank You