New standard for audit opinion

1. ISA 700 (Revised) and ISA 701
A new way of communication: Enhanced
auditor’s report
ICAG- PRACTISING CERTIFICATE ORIENTATION
10 - 13 DECEMBER 2018
BY:
RANSFORD ARMAH
MANAGER, QAM

2. THE AIMS OF THE CHANGES TO THE AUDITOR’S
REPORT
 To shed light on those matters, that in the
auditor’s judgement, were of most significance in
the audit of the financial statements.
 To introduce an explicit statement regarding
auditor’s independence in all reports and identify
the engagement partner’s name in audit reports for
listed entities, though not a significant impact as
similar practice is already in place in Ghana.
 To provide a restructured report that puts the audit
opinion and entity-specific information first.
Insight
Transparency
Readability

3. Overview of the new reporting model in the ISAs
Opinion Moved to the first section of the report.
Basis for Opinion Includes a new statement of the auditor’s independence.
Material uncertainty
regarding going concern
(if any)
Any material uncertainty with respect to going concern
will be described in a separate section.
Key audit matters New section will be required for audits of listed companies,
but can also be included voluntarily by others.
Other information New section describing auditor’s responsibilities for “other
information” and the outcome of these procedures.
Responsibilities for the
financial statements
Responsibilities expanded to explain management’s
responsibilities with respect to going concern.
Auditor’s responsibilities More comprehensive description of auditor’s
including a description of responsibilities with respect to
going concern.
Date, address and
signature
Auditor’s reports for all companies will identify the
engagement partner’s name (this is already done in Ghana)
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4. COMPONENTS OF THE NEW AUDIT REPORT
 The auditor’s report shall be in writing
 The auditor’s report shall have a title that clearly indicates that it is
the report of an independent auditor
 Addressee : The auditor’s report shall be addressed as appropriate
based on the circumstances of the engagement
 Auditor’s Opinion : The first section of the auditor’s report shall have
the heading “Opinion”. The Opinion section shall
 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: and
 Specify the date of or the period covered by each financial
statement comprising the financial statements

5. COMPONENTS OF THE NEW AUDIT REPORT (CONT’D)
 Basis for Opinion : This shall directly follow the Auditor’s Opinion.
Heading shall clearly state “Basis for Opinion”. The Basis for Opinion
shall :
 State that the audit was conducted in accordance with
International Standards on Auditing
 Refer to the section of the auditor’s report that describes the
auditor’s responsibilities under the ISAs

6. COMPONENTS OF THE NEW AUDIT REPORT (CONT’D)
 Basis for Opinion : This shall directly follow the Auditor’s Opinion.
Heading shall clearly state “Basis for Opinion”. The Basis for Opinion
shall :
 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. Shall
identify the jurisdiction of origin of the relevant ethical
requirements or refer to The International Ethics Standards
Board for Accountants’ Code of Ethics for Professional
Accountants (IESBA)
 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.

7. COMPONENTS OF THE NEW AUDIT REPORT (CONT’D)
 Going Concern – Wherever applicable the auditor shall report in accordance
with ISA 570 (Revised)
 Key Audit Matters for audits of listed entities in accordance with ISA 701
 Responsibilities of Management for the Financial Statements
 Auditor’s Responsibilities for the Audit of the Financial Statements
 Sec 37(C) - Affirmation of Guidance in paragraph A47 of ISA 700
(revised)
 Other Reporting Responsibilities - Report on Other Legal and Regulatory
Requirements
 Name of Engagement Partner
 Signature of Auditor
 Auditor’s Address

8. SIGNING OF AUDIT OPINIONS ON AUDITED FINANCIAL STATEMENTS OF LISTED COMPANIES
IN GHANA
• The engagement partner on the audit resulting in this independent
auditor’s report is Name of Engagement Partner (Practising Certificate
Number)
• Signature of the Auditor/Firm ----------------
• Name of the Auditor/Firm -- i.e. the Firm appointed as auditor
Licence Number of the Firm appointed as auditor
• “Chartered Accountants” should be disclosed
• Address of auditor
• Date of the audit report

9. SIGNING OF AUDIT OPINIONS ON AUDITED FINANCIAL STATEMENTS OF ENTITIES OTHER
THAN LISTED COMPANIES IN GHANA
• Signed by: Name of Engagement Partner
Practising Certificate Number:
• Signature of the Auditor/Firm ----------------
• Name of the Auditor/Firm -- i.e. the Firm appointed as auditor
Licence Number of the Firm appointed as auditor
• “Chartered Accountants” should be disclosed
• Address of auditor
• Date of the audit report

10. HOW WILL DIFFERENT AUDIT REPORTS BE AFFECTED?
Listed companies
• Key audit matters – those
matters which, in the auditor’s
judgement, were most
to the audit (most significant
enhancement)
• Name of engagement partner
though not a significant impact
as there is already a similar
practice in Ghana.
All entities
• Opinion moved to be first
• Enhanced reporting on going
concern
• Affirmation of auditor’s
independence
• Enhanced descriptions of both
management’s and auditor’s
responsibilities
• Expanded section regarding
auditor’s responsibilities with 10

11. WHEN DO THE NEW REPORTS COME INTO EFFECT?
 The new requirements will be effective for audits
of financial statements for periods ending on or
after 15 December 2016.
 Therefore, the first report to be issued by auditors
will be for their audit of financial statements for
the year ended 31 December 2016.

12. ISA 701 : KEY AUDIT MATTERS (KAM)
introduction
“Without doubt, the most
significant innovation in the new
auditor’s reports is the
introduction of ‘key audit
matters’ (ISA 701) – it’s the
section of the new reports that
shareholders have pointed to as
being the most valuable.”
“Without doubt, the most
significant innovation in the new
auditor’s reports is the
introduction of ‘key audit
matters’ (ISA 701) – it’s the
section of the new reports that
shareholders have pointed to as
being the most valuable.”

13. ISA 701
What are
Key Audit Matters
(KAMs)?
KAMs are selected from
matters we have already
communicated with those
charged with
governance. There is a
focus on those of most
significance .
KAMs are those matters that, in
the auditor’s professional
judgment, were of most
significance in the audit of the
financial statements in the
current period.
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14. Types of matters that have been reported
• Goodwill
impairment
• Revenue
recognition
• IT
environment
and control
deficiencies
• Inventory valuation
• Property valuation
and impairment
• Claims & litigation
• Taxation (deferred
& current)
• Management
override of
controls
• Loan
impairment
provisions
KAMS are often related to areas in which
management has exercised significant judgement in
the accounting treatment and /or measurement or
valuation

15. THANK YOU!