1. BUU44670 Audit And Assurance
Answers:
Audit Reports
It is the responsibility of the auditor to express an opinion on whether the audit client
prepares the financial statements as per the pertinent framework for financial reporting.
During providing that opinion, the auditor is responsible to conclude on whether he/she
has acquired rational assurance about whether the financial statements are free from
material misstatement because of error or fraud (ifac.org 2022). There are two types of
audit opinions: Unmodified audit opinion and modified audit opinion (ifac.org 2022). An
unmodified audit opinion is issued by the auditor when he/she concluded that the audit
client prepared the financial statements as per the appropriate financial reporting
framework, and there is rational assurance that there is not any material misstatements in
the financial statements (ifac.org 2022). Modified audit opinions can be divided into three
types: Qualified opinion, adverse opinion, and disclaimer of opinion. The auditor expresses
a qualified audit opinion when evidence is acquired on the fact that there is material
misstatement in the financial statements as a whole, but the material misstatement is not
pervasive (ifac.org 2022). The auditor also issues a qualified audit opinion when the auditor
cannot obtain adequate, appropriate audit evidence about the material or pervasive issues.
The auditor expresses an adverse audit opinion when the audit client does not prepare the
financial statements as per the appropriate framework for financial reporting, and there is a
material misstatement in the financial statements, which is pervasive (ifac.org 2022). The
auditor expresses a disclaimer of audit opinion when the auditor cannot attain adequate
appropriate audit evidence to express an audit opinion (ifac.org 2022). There are
circumstances where the auditor issues unqualified audit opinion in a modified audit report
by including emphasis of matter paragraph, and/or other matter paragraph, and/or going
concern significant uncertainty paragraph. Examples of emphasis of matter paragraph
include the uncertain consequence of ongoing litigation, early adoption of new accounting
standards and others (ifac.org 2022). Other matters include requesting the auditor to report
on other matters, limitations imposed by management, but the auditor cannot withdraw,
and others. Going concern paragraph includes information on a going concern uncertainty
faced by the audit client for drawing users’ attention to the issue. In addition, the auditor is
also needed to report on the key audit matters, which are the most significant issues
encountered by the auditor during the audit. These matters include the areas of financial
2. statements which are at a high risk of material misstatements (ifac.org 2022).
References
Ifac.org. 2022. Handbook of international quality control, auditing, review, other assurance,
and related services pronouncements. Available at:
Https://www.ifac.org/system/files/publications/files/iaasb-2020-handbook-volume-1.pdf
(accessed: 9 january 2022).
Ifac.org. 2022. International standard on auditing 700 (revised) forming an opinion and
reporting on financial statements. Available at:
Https://www.ifac.org/system/files/publications/files/isa-700-revised_8.pdf (accessed: 9
january 2022).
Ifac.org. 2022. International standard on auditing 705 (revised) modifications to the
opinion in the independent auditor’s report> available at:
Https://www.ifac.org/system/files/publications/files/isa-705-revised_0.pdf (accessed: 9
january 2022).
