PSA 700: Forming an Opinion and Reporting on Financial Statements -deals with the auditors responsibility to form an opinion

on the FS; also the form and content of the auditors report -promotes consistency in the auditors report and users understanding and identify unusual circumstances as they occur Objectives of the auditor: a. Form an opinion b. Express clearly the opinion through a written report that also describes the basis for the opinion General purpose financial statements financial statements prepared in accordance with a general purpose framework General purpose framework a financial reporting framework designed to meet the common financial information needs of a wide range of users Financial reporting framework can either be: a. Fair presentation framework requires compliance with the requirements of the framework and acknowledges that it may be necessary for mgmt to: (i) provide disclosures beyond those specifically required by the framework (ii) depart from a requirement to achieve fair presentation b. Compliance framework stricter; requires compliance with the requirements of the framework, but does not contain acknowledgements in (i) and (ii) Unmodified opinion expressed by the auditor when the auditor concludes that the FS are prepared in all material respects, in accordance with the applicable financial reporting framework. *FS in this PSA a complete set of general purpose FS, including the related notes requirements of the applicable financial reporting framework determine the form and content of FS, and what constitutes a complete set of FS Forming an Opinion on the FS -the auditor shall form an opinion on whether the FS are prepared, in all material respects, in accordance with the applicable financial reporting framework. -to form that opinion auditor shall conclude whether the auditor has obtained reasonable assurance about whether the FS as a whole are free from material misstatement -CONCLUSION should take into account: o o whether sufficient appropriate evidence has been obtained whether uncorrected misstatements are material, individually or in aggregate.

evaluations (prepared, in all material respects, adequate disclosure, consistent, appropriate acctg policies, reasonable acctg estimates, relevant, reliable, comparable and understandable, appropriate terminology)

fair presentation, ^ shall include whether the FS achieve fair presentation -consider overall presentation, structure and content auditor shall evaluate whether the FS adequately refer to or describe the applicable financial reporting framework

Forms of Opinion Auditor shall express an unmodified opinion when the auditor concludes that the FS are prepared, in all material respects, in accordance with the AFRF. The auditor shall modify the report if the auditor: o o Concludes that, based on evidence obtained, the FS as a whole are not free from material misstatement; or Is unable to obtain sufficient appropriate audit evidence If the FS prepared in accordance with the reqts of a fair presentation framework do not achieve fair presentation: o o Discuss the matter with mgmt Depending on the requirements of the AFRF and how the matter is resolved, determine whether it is necessary to modify the opinion When the FS are prepared in accordance with a compliance framework o o Auditor is not required whether the FS achieve fair presentation If in extremely rare circumstances, the auditor concludes that such FS are misleading Auditors Report Shall be in WRITING (hard copy /electronic medium) Title clearly indicates that it is a report of an independent auditor; Independent Auditors Report Addressee normally those for whom the report is prepared; often either to the shareholders or those charged with governance of the entity -audited Introductory Paragraph shall: o o o o o Identify the entity whose FS have been audited State that the FS have been audited Identify the title of each statement that comprises the FS Refer to the summary of significant acctg policies and other explanatory info Specify the date or period covered by each FS comprising the FS Discuss the matter with mgmt Depending on how it is resolved, determine whether and how to communicate it in the auditors report

*auditors opinion covers the complete set of FS (BS, IS, SCE, CFS, summary of significant..) Managements Responsibility for the FS

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Responsibilities of those in the org that are responsible for the preparation of the FS (need not refer specifically to mgmt; in some jurisdictions, those charged with governance) Shall be described in the manner in which the responsibility is described in terms of the audit engagement Description shall include: An explanation that the mgmt is responsible for the presentation of the FS in accordance with AFRF Design, implementation and maintenance of internal control relevant to the preparation of FS that are free from material misstatement, whether due to fraud or error

Fair presentation framework: mgmts responsibility shall refer to the preparation and fair presentation of these FS

Auditors Responsibility o o o State that the responsibility of the auditor is to express an opinion on the FS based on the audit State that the audit was conducted in accordance with PSAs Explain that those standards require that the auditor comply with ethical requirements and that the auditor plan and perform the audit to obtain reasonable assurance about whether the FS are free from material misstatement o Auditors report shall describe an audit by stating that: An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the FS the procedures selected depend on the auditors judgment, including the risks of material misstatement of the FS, whether due to fraud or error auditor considers internal control relevant to the entitys preparation of the FS in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control (omit but not if the auditor also has the responsibility for that) o o audit also includes evaluating the appropriateness of the acctg policies used and the reasonableness of the acctg estimates made by mgmt, as well as overall presentation of the FS fair presentation framework: description of the audit shall refer to the entitys preparation and fair presentation of the FS state whether the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditors opinion

Auditors Opinion o o o Heading: Opinion Unmodified opinion under fair presentation FW: The FS present fairly, in all material respects, in accordance with [AFRF] Unmodified opinion under compliance FW: FS are prepared, in all material respects, in accordance with [AFRF]

If the reference to the AFRF is not to PFRS or IFRS, the auditors opinion shall identify the jurisdiction of origin of the framework

Other Reporting Responsibilites o o Shall be addressed in a separate section in the auditors report that shall be subtitled Report on Other Legal and Regulatory Requirements If the auditors report contains a separate section on other reporting responsibilities The headings, statements and explanations (from introductory paragraph to auditors opinion) shall be under the subtitle Report on the FS, followed by the report on other legal regulatory reqts o Example: external auditors are asked to report certain matters if they come to the auditors attention during the course of the audit of the FS report on the adequacy of acctg books and records o Relevant law or regulation may require or permit the auditor to report on these other responsibilities within the auditors report or in other cases, in a separate report

Signature of the Auditor o o o Auditors report should be signed Either in the name of the audit firm, the personal name of the auditor or both In certain jurisdictions, report the auditors professional acctcy designation or the fact that the auditor or firm has been recognized by the appropriate licensing authority

Date of the Auditors Report o Shall be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditors opinion on the FS Including evidence that: -all statements that comprise the FS, including related notes, have been prepared -those with the recognized authority have asserted that they have taken responsibility for those FS o In forms the user of the report of the effect of events and transactions considered up to that date

Auditors Address o o o Shall name the jurisdiction where the auditor practices Consistency promotes credibility in the global marketplace (only difference to the PSA is the wording) Auditors report shall refer to PSAs only if the auditors report includes at the minimum the elements (title to auditors address) considered to have compliance with the requirements of PSA Auditors report prescribed by law or regulation

Auditors report for audits conducted in accordance with both auditing standards of a specific jurisdiction and PSA o WHEN in addition to complying with the relevant auditing standards of a specific jurisdiction, auditor complies with each of the PSAs relevant to the audit

The auditors report may refer to PSAs in addition to the auditing standards of a specific jurisdiction, only if: There is no conflict between the reqts that would lead the auditor (i) to form a different opinion or (ii) not to include an emphasis of matter paragraph, that in some instances is required by PSAs Includes minimum elements

When the auditors report refers to both the auditing standards of a specific jurisdiction and PSAs identify the jurisdiction of origin

Supplementary information presented with the FS o o o o o Might be presented to enhance the users understanding of the AFRF or to provide further explanation of specific FS items Normally presented in supplementary schedules or additional notes Auditor shall evaluate whether such supplementary info is clearly differentiated from audited FS If not clearly diff, ask mgmt to change how the unaudited supplementary info is presented; if mgmt refuses explain in the auditors report that such supplementary info has not been audited Mgmt could change the presentation of unaudited supplementary info that could be construed as being covered by the auditors opinion by: Removing any cross references from the FS to unaudited supplementary schedules or unaudited notes, so that the demarcation between the audited and unaudited info is sufficiently clear Placing the unaudited supplementary info outside of the FS o The fact that the supplementary info is not audited does not relieve the auditor of the responsibility to read that info to identify material inconsistencies with the audited FS

APPLICATION & OTHER EXPLANATORY MATERIAL Qualitative Aspects of the entitys accounting practices mgmt makes a number of judgments about the accounts and disclosures in the FS (Auditors Opinion) Description of the Applicable Financial Reporting Framework advises the users of the FS of the framework on which the FS are based appropriate only if the FS comply with all the requirements of that framework that are effective during the period covered by FS appropriate only if the FS comply with each of the FW individually when FS are prepared in accordance with 2 financial reporting frameworks (comply with both frameworks simultaneously and without any need for reconciling statements *FS prepared in accordance with 1 financial reporting FW and that contain a note or supplementary statement reconciling the results to those that would be under another FW NOT prepared in accordance with the other FW The FS may be prepared with 2 financial reporting frameworks If the FS comply with each of the FW individually, two opinions are expressed

If the FS comply with one of the FW but fail to comply with the other FW an unmodified opinion can be given that the FS are prepared in accordance with one FW; but a modified opinion given with regard to the other FW

*The FS may be prepared in accordance with 1 AFRF and in addition, describe in the notes to FS the extent to which the FS comply with another framework If the disclosure as to compliance with another FW is misleading, a modified opinion is expressed If the disclosure is not misleading, but the auditor judges it to be of such importance that it is fundamental to the users understanding of the FS, an Emphasis of Matter paragraph is added