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The IAASB's revised Auditor Reporting Standards and related conforming

amendments to enhanced the communicative value of the Independent


Auditor’s Report. The changes to the auditor’s report was primarily
driven by calls from investors and analysts, as far back as 2009, to
find a way that they and other users of audited financial statements
and the auditor's report thereon, may benefit from the considerable
knowledge that the auditor has about the audited entity by reporting
more entity-specific and audit-specific information in the auditor's
report.

The following are the ISA’s that change:

ISA 700 (Revised), Forming an Opinion and Reporting on Financial


Statements;
ISA 701, Communicating Key Audit Matters in the Independent Auditor's
Report;
ISA 705 (Revised), Modifications to the Opinion in the Independent
Auditor's Report;
ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor's Report;
ISA 570 (Revised), Going Concern;
ISA 260 (Revised), Communication with Those Charged with Governance;
and Related Conforming Amendments to other ISA’s.

Changes and similarities of the revised and unrevised Auditor’s Report

ELEMENTS REVISED UNREVISED

Title The auditor’s Report must The auditor’s Report must


have title that clearly have title that clearly
indicates that it is the indicates that it is the
report of an independent report of an independent
report. report.
Addressee The report should be The report should be
addressed to those parties addressed to those parties
for whom the report is for whom the report is
prepared. prepared.

As regulatory requirement, if As regulatory requirement, if


the audit report accompanying the audit report accompanying
the FS is to be filed w/ the the FS is to be filed w/ the
regulatory agencies, the regulatory agencies, the
Philippine Security and Philippine Security and
exchange commission requires exchange commission requires
the auditor’s report to the auditor’s report to
indicate the complete mailing indicate the complete mailing
address of the client. address of the client.

Introductory No introductory paragraph is Introduction paragraph is


paragraph included as noted in ISA 700 included.
(Old).

Introduction is separate from


Introduction is included as the “Audit Opinion” section.
part of the succeeding “Audit
Opinion” section.
Auditor’s This section is included at This section is included
opinion(revis the top, Immediately after within the body of the audit
ed) the addressee. report.

Auditor’s opinion is Auditor’s opinion is


expressed before expressed after the “Basis
for Opinion” in case of a
the “Basis for Opinion” modified opinion or below
unlike in the “Auditor’s Responsibility”
ISA 700 (Old). section in case of an
unmodified opinion.

The “Opinion” section of the


auditor’s report shall also: These requirements were not
Identify the entity whose AFS explicitly required under the
have been audited; opinion section. Most of
these were noted in the
introductory paragraph.
A) State that the AFS have been
audited unless a disclaimer
of opinion is expressed in
which case it shall state that
the auditor was engaged to
audit,refer ISA705 (Revised)
par 19(b);

B) Identify the title of each


statement comprising the AFS;

C) Refer to the notes,


including summary of
significant accounting
policies; and

D) Specify the date covered by


the AFS.

Basis for The “Basis for Opinion” The “Basis for Opinion”
Opinion section is included for all section is not included for
types of auditor’s opinions all types of
including the unmodified
opinion. auditor’s opinions but for
modified opinions only.

This section is included


after the“Opinion” section of This section is included
the audit report. before the “Opinion” section
of the audit report.

The “Basis for Opinion”


section shall These requirements were not

state that: explicitly required under


this section. Most of these

requirements were noted in


A) The Audit was conducted in other parts of the audit
terms of IAS; report and not specifically
B) Refers to the section of the on this section.
audit report that describes
auditor’s responsibilities;

C) Includes a statement that


the auditor has complied with
all ethical requirements
specifically stating the
auditor’s independence;

D) Includes a statement that


the Auditor exercised
professional skeptism
throughout the audit;

E) State whether the auditor


believes audit evidence
obtained is

sufficient and appropriate to

provide a basis for opinion.


Going Concern The revised ISA requires In the old ISA, Going Concern
Going Concern to be reported
(revised) in a separate section under a reporting was intrinsic
separate heading and within the audit report.
There was no separate section
paragraph. to report on Going Concern.

Where a material uncertainty Where a material uncertainty


(that casts doubt on the
audited entity’s ability to (that casts doubt on the
continue as a going concern) audited entity’s ability to
continue as a going concern)
exists, the auditor shall exists, the auditor shall
include a separate section in include an “Emphasis of
the auditor’s report under Matter” paragraph.
the heading “Material
Uncertainty Related to Going

Concern”. Note that we no ISA 701 (new) is a new standard


longer reporting this under that is effective for audits
an “Emphasis of matter” of AFS for periods ending on
paragraph. or after 15 December 2016. Key
audit matters were not
specifically required to be
reported on in a separate
It is important to note that section of the audit report.
ISA 701 (new) read in
conjunction with ISA 706

(revised) states that the


auditor shall include
“Emphasis of Matter”
paragraph (or “Other Matter”

paragraph) in the audit


report provided that the
matter communicated has not
been determined to be a key
audit matter per requirements
of ISA 701 (new). Such a matter
will be disclosed under

the “Key Audit Matters”


section of the audit report.

“Key Audit ISA 701 (new) is a new standard ISA 701 (new) is a new standard
Matters that is effective for audits
of AFS for periods ending on that is effective for audits
of AFS for periods ending on
or after 15 December 2016. or after 15 December 2016. Key
audit matters were not
specifically required to be
The audit shall include a reported on in a separate
separate section in the section of the audit report.
auditor’s report under

the heading “Key Audit


Matters”, as per the
requirements of ISA 701(new).

The “Key Audit Matters”


section is placed in close
proximity to the auditor’s
opinion to give appropriate

Prominence to the
communicated information and

to acknowledge the perceived


value of engagement-specific
information to intended
users.

It is important to note that


ISA 705 (revised) prohibits a
“Key Audit Matters” section
(or “Other Information”
section) from the auditor’s

report when the auditor


disclaims an opinion. This is
because communicating any key
audit matters other than the
ones giving rise to a

disclaimer of opinion may


suggest AFS are more credible
in relation to hose other
matters. This will be

inconsistent with the


disclaimer of opinion.
Therefore, there is no “Key

Audit Matters” section (or


“Other Information” section)
in an audit report where there
is a disclaimer of opinion.

Other This section is for reporting This section was not


Information in accordance with the explicitly required to be
requirements of ISA 720 positioned here under the old
(revised)under the heading ISA 700. The section was for
“Other Information”. This
section is included reporting in accordance with
immediately after the “Key the requirements of ISA 720
Audit Matters” section in the (old).
audit report.

Responsibilit This section has now been This section was positioned
ies for positioned far below on the at the top of the audit report
Financial audit report, below just below the“Introductory”
Statements: the“Opinion” section in order section, before the“Opinion”
to add value to the users of section.
financial statements.

The auditor was not


The auditor shall explicitly explicitly
communicate in this section
that management is required to communicate in
responsible for assessing the this section of the audit
entity’s ability to continue report that management is
as a going concern and whether responsible for assessing the
the use of the going concern entity’s ability to continue
basis is appropriate. as a going concern and

whether the use of the going


concern basis is appropriate.
This was done elsewhere in the
audit report.

Auditor’s This section has now been This section was positioned
Responsibilit positioned within the body of below the“Management’s
ies: the audit report, far below Responsibility” section just
the “Opinion” section in before the “Opinion”
order to add value to the users section.The location of the
of financial statements. auditor’s responsibilities
was only within the body of the
audit report
According to ISA 700
(revised) par 41, the

description of the auditor’s This section did not


responsibilities explicitly state

can be located either: these requirements. Some of


the
(a) Within the body of the
auditor’s reports; requirements we stated
elsewhere in
(b) As an appendix to the
auditor’s report; the audit report, e.g.
objectives of the
or
auditor were normally stated
(c)On a website of the entity in the
(an appropriate authority)
where the law permits. “Introductory” section of the
audit

report.
This section shall explicitly
state: ISA 701 (new) is a new
standard that
(a) The objectives of the
auditor; is effective for audits of AFS
for periods ending on or after
(b) That reasonable assurance 15 December 2016. Key audit
is a high level assurance; matters were not specifically
(c) That misstatements can required to be reported on in
arises from fraud or error and this section.
describe that they are
considered material. Provide
a definition or description
of materiality.

(d) That key audit matters as


per the requirements of ISA
701(new) are communicated to
those charged with

governance.

Other There are no differences in There are no differences in


Reporting this section. This section this section.This section
Responsibilit remains before the auditor’s remains before the auditor’s
ies: signature. signature.

Name of the Unlike in the old ISA 700 The name of the engagement
Engagement (old), the name of the
Partner (for engagement partner shall be partner was not specifically
listed explicitly included in the
company only) audit report for listed required to be included in the
entities unless there is a audit report. Signature and
significant personal name of the firm alone was
security threat to the sufficient.
engagement partner.
Signature and name of the firm
alone is not sufficient.

Auditor’s The report should be signed in The report should be signed in


signature the name of the audit firm the name of the audit firm
and/or the personal name of and/or the personal name of
the auditor as appropriate. the auditor as appropriate.

Auditor’s The auditor’s report should The auditor’s report should


address name the location in the name the location in the
jurisdiction where the jurisdiction where the
auditor maintains his office. auditor maintains his office.

Date of the The date of the report is The date of the report is
report important because that is the important because that is the
date when the auditor’s date when the auditor’s
responsibility for responsibility for
subsequent events ends. subsequent events ends.

DIFFERENCES BETWEEN ISA 570 (REVISED) AND ISA 570 (OLD) – GOING CONCERN

GOING CONCERN UNREVISED REVISED

(ISA 570)

1. Use of Going Concern Par 21: express an Par 21: express an


Assumption is adverse audit opinion; adverse audit
Inappropriate or
opinion; or
Par A26: prepare on
another basis such as Par A27: prepare on
liquidation basis.The another basis
auditor can now express such as liquidation
an unmodified opinion basis. The auditor
(with Emphasis of
Matter) provided that can now express an
unmodified opinion
adequate disclosure is provided that adequate
made of the new basis.
disclosure is made of
the new basis.

2.Use of the Going Par 19: express an Par 22: express an


Concern Assumption is unmodified opinion and unmodified opinion and
Appropriate but a in the auditor’s report in the auditor’s report

Material Uncertainty and include an Emphasis and include a separate


exist and Adequate of Matter paragraph. section under the
disclosure is made: Note that the entity has heading “Material
Uncertainty Related to
to disclose in this Going Concern”.
paragraph that a
material uncertainty
exists.
See

(Illustration Example
1) Note that the entity
has to disclose in this
paragraph that a

Material uncertainty
exists.

Note also the Basis


for Opinion paragraph
even though we express
an unmodified opinion.

3.Use of the Going Par 20: Express a: Par 23: Express a:


Concern Assumption is Qualified opinion
Appropriate but a (where there is Qualified opinion
Material Uncertainty incomplete disclosure, (where there is
exist and adequate par A23);OR Adverse inadequate disclosure,
disclosure is not made: opinion(where the par A32
entity omitted the
disclosure, par A24)
(Illustration Example
2); OR Adverse opinion
(where the entity

did not disclose, par


A32

(Illustration Example
3).Note that the entity
has to disclose in the

“Basis for Opinion”


paragraph that a
Material uncertainty
exists.

4.Use of Going Concern Par A22: Express a This revised ISA is


is appropriate but disclaimer of opinion silent with regards
there are multiple
uncertainties: to the opinion that
should be expressed
where there are
multiple
uncertainties.

ISA 705 (revised):


Illustration Example 5
notes that a disclaimer
of opinion should be
communicated.

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