This document provides an overview of various auditing standards for reporting, including: - SA 700 (Revised) on forming an opinion and the auditor's report. It discusses requirements for unmodified and modified opinions. - Illustrative auditor's reports are provided under the Companies Act 2013 financial reporting framework for unmodified opinions with and without internal control reporting, and for qualified, adverse, and disclaimer opinions. - SA 705 on modifications to the auditor's opinion, including the different types of modifications and their required form and content in the report. - SA 706 on emphasis of matter and other matter paragraphs that can be included in the auditor's report. The document discusses the objectives, requirements, and

1. AUDIT REPORTS IN Cos Act
2013 FRF
ASHOK SETH, Lucknow
B. Sc, FCA, DISA (ICA)
as@sethspro.com

2. Standards for Reporting
 SA 700 (Revised) Forming an Opinion &
Reporting on FS
 SA 705 Modification to the Opinion in IAR
 SA 706 Emphasis of Matter Paragraphs in IAR
 SA 710 (Revised) Comparative Information
 SA 2400 (Review) Engagement to review FS
 SA 3400 The Examination of Prospective FS
 SA 4400 To perform Agreed upon Procedures
 SA 4410 Engagement to compile Financial
Information
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3. AS 700 (Revised) EFFECTIVE
FROM
 For ALL audits relating to accounting
periods beginning on or after 1st April
2011.
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4. Forming an Opinion on the FS
 Shall form an opinion whether FS are
prepared in all material respects in
accordance with applicable Financial
Reporting Framework (FRF)
Contd.
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5. Forming an Opinion- Contd.
 to form that opinion, the auditor shall
conclude as to whether he has
obtained reasonable assurance about
whether the FS as a whole are free
from material misstatement, whether
due to fraud or error. That conclusion
shall take into account: That the
Auditor’s conclusions is
Contd.
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6. Forming an Opinion- Contd.
 in accordance with SA 330, whether
sufficient appropriate audit evidence
has been obtained;
 in accordance with SA 450, whether
uncorrected misstatements are
material, individually or in aggregate;
&
 The evaluations required by Para 12-
15.
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7. Auditor shall evaluate whether
 The FS adequately disclose the
significant accounting policies
selected and applied;
 The accounting policies selected and
applied are consistent with the
applicable financial reporting
framework and are appropriate;
 The accounting estimates made by
management are reasonable; Contd.
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8. Auditor shall evaluate whether-
Contd.
 The information presented in the financial
statements is relevant, reliable, comparable
and understandable;
 The financial statements provide adequate
disclosures to enable the intended users to
understand the effect of material
transactions and events on the information
conveyed in the financial statements; and
(Ref: Para. A4)
 The terminology used in the financial
statements, including the title of each
financial statement, is appropriate
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9. FORM OF OPINION
 Unmodified Opinion
 When FS in all material respects
prepared in accordance with FRF
 Modified Opinion- SA 705
 If based upon the audit evidence FS as a
whole are not free from material
misstatement
 If unable to obtain sufficient appropriate
audit evidence
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10. for Audits Conducted in
Accordance with S A
 Title
 Addressee
 Introductory paragraph
 Management Responsibility for the FS
 Auditor’s Responsibility
 Auditor’s Opinion
 Other Reporting Responsibilities
 Date, Place and Signature of the Auditor
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11. Title & Addressee
 Title (A15)
 “Independent Auditors Report”
 Addressee (A16)
 As required by the circumstances
 Normally addressed to those for whom
the report is prepared
 Report on the Standalone Financial
Statements
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12. Introductory paragraph (A17 to
A19)
 SHALL: -
 Identify the entity
 State that the FS have ben audited
 Identify the title of each statement that
comprises FS
 Refer to summary of Significant
Accounting Policies and other
explanatory information
 Specify the date or period covered by
each FS
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13. Management Responsibility for
the FS
 Use the term that is appropriate in legal
or regulatory framework applicable
 May not be word “management”
 May be “those charged with governance”
 Board of Directors under Co Act
 report shall include a section with the
heading “Management’s [or other
appropriate term] Responsibility for the
FS Contd.
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14. AUDITOR’S RESPONSIBILITY
 The shall include a section with the
heading “Auditor’s Responsibility”.
 The auditor’s report shall state
 that the responsibility of the auditor is to
express an opinion on the financial
statements based on the audit.
 Contd.
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15. Audit Report Shall also describe
that: -
 An audit also includes evaluating the
appropriateness of the accounting
policies used and the reasonableness of
accounting estimates made by
management, as well as the overall
presentation of the financial statements
 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
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16. Auditor’s Opinion- Section with
the heading “Opinion”
 In an unmodified opinion in accordance
with a fair presentation framework, the
auditor’s opinion shall, unless otherwise
required by law or regulation, use one of
the following phrases, (A26-A32)
 (a) The financial statements present fairly,
in all material respects, in accordance with
[the applicable financial reporting
framework]; or
 (b) The financial statements give a true and
fair view of in accordance with [the
applicable financial reporting framework].
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17. Other Reporting Responsibilities
 these other reporting responsibilities
shall be addressed in a separate
section in the auditor’s report that
shall be sub-titled “Report on Other
Legal and Regulatory Requirements,”
or otherwise as appropriate to the
content of the section. (A33-A34)
 Contd.
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18. Signatures, Date, Place
 Shall be Signed
 The auditor’s report shall be dated no
earlier than the date on which the
auditor has obtained sufficient
appropriate audit evidence, including
evidence that:
 (a) All the statements in the FS, including
the related notes, have been prepared; and
 (b) Those with the recognised authority
have asserted that they have taken
responsibility for those FS
 Location where the Report is signed
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19. Auditor’s Report Prescribed by
Law or Regulation
 When the differences between the
legal or regulatory requirements and
SAs relate only to the layout and
wording of the auditor’s report and,
at a minimum, each of the elements
identified in paragraph 43(a)-(i) are
included in the auditor’s report, the
auditor’s report may refer to
Standards on Auditing. Otherwise
Auditor may not refer to SA
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20. Illustration -1 (Under Cos Act
2103 FRF) SA 700
 The report is unmodified and include an
Emphasis of Matter paragraph and Other
Matter(s) paragraph
 including the responsibility to report on
internal financial controls pursuant to
section 143(3)(i) of the Companies Act
2013
 other reporting responsibilities required
under the Cos Act 2013 and the Rules
thereunder.
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21. Illustration -2 (Under Cos Act
2103 FRF) SA 700
 The report is unmodified and include an
Emphasis of Matter paragraph and Other
Matter(s) paragraph
 Does not include the responsibility to
report on internal financial controls
pursuant to section 143(3)(i) of the
Companies Act 2013
 other reporting responsibilities required
under the Cos Act 2013 and the Rules
thereunder.
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22. SA 705 When Modification
Required
 The auditor concludes that, based on
the audit evidence obtained, the FS
as a whole are not free from material
misstatement; or (Ref: Para. A2-A7)
 The auditor is unable to obtain
sufficient appropriate audit evidence
to conclude that the FS as a whole
are free from material misstatement.
(Ref: Para. A8-A12)
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23. SA 705- Modification to the
Opinion in the IAR
 Three Types of Modified Opinions: -
 Qualified Opinion (Subject to True & fair)
 Adverse Opinion (Not true & Fair)
 Disclaimer Opinion
 Refer Para A1 for decision regarding
which type of modified opinion is
appropriate depends upon
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24. Decision Matrix
Nature of
Matter Giving
Rise to the
Modification
Auditor’s Judgment about the
Pervasiveness of the Effects or
Possible Effects on the FS
Material but Not
Pervasive
Material and
Pervasive
FS are
materially
misstated
Qualified Opinion Adverse Opinion
Inability to obtain
sufficient
appropriate audit
evidence
Qualified Opinion Disclaimer of
opinion
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25. Modified Opinion- Form &
Content
 Shall, include a Para in the report
that provides a description of the
matter giving rise to the modification.
 Place this Para immediately before
the opinion Para in the report & use
the heading “Basis for Qualified
Opinion”, “Basis for Adverse Opinion”,
or “Basis for Disclaimer of Opinion”,
as appropriate. (Ref: Para. A17)
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26. Modified Opinion- Form &
Content- Contd.
 material misstatement that relates to
specific amounts in the FS (including
quantitative disclosures), the auditor
shall include in the basis for modification
Para a description & quantification of the
financial effects of the misstatement,
unless impracticable. If it is not
practicable to quantify the financial
effects, the auditor shall so state in the
basis for modification paragraph
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27. Modified Opinion- Form &
Content- Contd.
 If there is a material misstatement of the
FS that relates to narrative disclosures, the
auditor shall include in the basis for
modification Para an explanation of how the
disclosures are misstated
 Describe in the basis for modification Para the
nature of the omitted information; and
 Unless prohibited by law, include the omitted
disclosures, provided it is practicable to do so
and the auditor has obtained sufficient
appropriate audit evidence about the omitted
information.
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28. Modified Opinion- Form &
Content- Contd.
 If the modification results from an
inability to obtain sufficient
appropriate audit evidence, the
auditor shall include in the basis for
modification paragraph, the reasons
for that inability.
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29. Qualified Opinion- material
misstatement
 State that, except for the effects of
the matter(s) described in the Basis
for Qualified Opinion paragraph
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30. Qualified Opinion- Inability to
obtain sufficient evidence
 shall use the corresponding phrase
“except for the possible effects of the
matter(s)...” for the modified opinion.
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31. Adverse Opinion
 State- because of the significance of
the matter of the matter(s) described
in the Basis for Adverse Opinion
paragraph
 when reporting in a fair presentation
framework -The FS do not present fairly,
(or give a true and fair view) in
accordance with the applicable FRF; or
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32. Disclaimer Opinion- Inability to
obtain sufficient evidence
 shall state in the opinion paragraph that
 because of the significance of the matter(s)
described in the Basis for Disclaimer of
Opinion paragraph, the auditor has not been
able to obtain sufficient appropriate audit
evidence to provide a basis for an audit
opinion; and, accordingly,
 the auditor does not express an opinion on
the financial statements
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33. Description of Auditor’s
Responsibility
 When the Auditor Expresses a
Qualified or Adverse Opinion
 the auditor shall amend the description
of the auditor’s responsibility to state
that 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.
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34. Description of Auditor’s
Responsibility
 When the Auditor Disclaims an
Opinion
 due to an inability to obtain sufficient
appropriate audit evidence- shall amend
the introductory paragraph of the report
to state that the auditor was engaged to
audit the FS. The auditor shall also
amend the description of the auditor’s
responsibility
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35. Contd.
 and the description of the scope of the
audit to state only the following: “Our
responsibility is to express an opinion on
the FS based on conducting the audit in
accordance with SA issued by the ICAI.
Because of the matter(s) described in the
Basis for Disclaimer of Opinion paragraph,
however, we were not able to obtain
sufficient appropriate audit evidence to
provide a basis for an audit opinion”.
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36. Illustration -3 (Under Cos Act
2103 FRF) SA 705
 The report is having QUALIFIED
OPINION with respect to the true and
fair view of the financial statements
on account of misstatement of
inventories. The misstatement is
deemed to be material but not
pervasive to the financial statements
 and include Other Matter(s)
paragraph
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37. Illustration -4 (Under Cos Act
2103 FRF) SA 705
 The report is having QUALIFIED
OPINION with respect to the true
and fair view of the financial
statements as auditor was unable
to obtain sufficient appropriate
audit evidence. The misstatement
is deemed to be material but not
pervasive to the financial
statements
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38. Illustration -5 (Under Cos Act
2103 FRF) SA 705
 Has issued an Adverse opinion on the
true and fair view of the financial
statements on account of events that
indicate a material uncertainty that
may cast significant doubt on the
Company’s ability to continue as a
going concern which has not been
disclosed in the financial statements
(and notes thereto)
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39. Illustration -6 (Under Cos Act
2103 FRF) SA 705
 Has given a disclaimer of opinion on the
FS on account of the fact that the auditor
was unable to obtain sufficient
appropriate audit evidence about multiple
elements of the financial statements. That
is, the auditor was unable to obtain audit
evidence about the entity’s inventories
and accounts receivable. The possible
effects of this inability to obtain sufficient
appropriate audit evidence are deemed to
be both material and pervasive to the
financial statements
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40. Emphasis of Matter Para and
Other Matter Para- SA 706
 Additional communication in the
auditor’s report to draw users’
attention to a matter or matters
presented or disclosed in the FS or
other than those presented
 that are of such importance that they
are fundamental to users’
understanding of the FS
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41. When Auditor includes
Emphasis of matter Paragraph
 Include it immediately after the Opinion
paragraph
 Use the heading “Emphasis of Matter”, or
other appropriate heading
 Include in the Para a clear reference to the
matter being emphasized and to where
relevant disclosures that fully describe the
matter can be found in the FS; and
 Indicate that the auditor’s opinion is not
modified in respect of the matter
emphasized.
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42. THANK YOU
Please mail your comments to
as@sethspro.com
30 Aprrl 2015 42CA Ashok Seth