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The accounting policies selected and applied are consistent with the financial reporting framework and are appropriate in the circumstances; The accounting estimates made by management are reasonable in the circumstances; The information presented in the FS, including accounting policies, is relevant, reliable, comparable and understandable; and The FS provide sufficient disclosures to enable users to understand the effect of material transactions and events on the information conveyed in the FS.
Title
The auditor's report should have a title that clearly indicates that it is the
Addressee
The auditor's report should be addressed as required by the circumstances of the engagement.
c)
Introductory paragraph
It should identify the entity whose FS have been audited and should state that the FS have been audited. It should also: Identify the title of each of the FS that comprise the complete set of FS. Refer to the summary of significant accounting policies and other explanatory notes; and Specify the date and period covered by the FS.
Management's responsibility for the financial statements The auditors should state that management is responsible for the preparation and the fair presentation of the FS in accordance with the applicable financial reporting framework and that this responsibility includes:
Designing, implementing and maintaining internal control relevant to the preparation and fair presentation of FS that are free from material misstatement; Selecting and applying appropriate accounting policies; and Making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
The auditor's report should state that : the responsibility of the auditor is to express an opinion on the FS based on the audit. the audit was conducted in accordance with International Standards on Auditing. the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor's opinion The auditor's report should 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 depends on the auditor's judgement, including the assessment of the risks of material misstatement of the FS, whether due to fraud or error An audit also includes evaluating the appropriateness of the accounting policies used, the reasonableness of the accounting estimates made by management, as well as the overall presentation of the FS.
Auditor's opinion
An unqualified opinion that the FS give a true and fair view or are presented fairly, in all material respects, in accordance with applicable financial reporting framework. An expression of opinion on the financial statements. A reference of the financial reporting framework used to prepare the FS When IFRS are not used, the reference to the financial reporting framework should identify the jurisdiction or country of origin of the financial reporting framework e.g. United Kingdom generally accepted accounting standards.
h)
i)
j)
We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at 31 December 2005, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate for our audit opinion.
MODIFIED REPORTS
Matters That Do Not Affect The Auditor's Opinion a) Emphasis of matter Matters That Do Affect the Auditor's Opinion a) Qualified opinion, b) Disclaimer of opinion, or c) Adverse opinion.
Adding an emphasis of matter paragraph after the opinion paragraph; Instances include i. Highlighting a material matter regarding going concern problem ii. Highlighting a matter affecting the FS which is included in a note in the FS that more extensively discusses the matter iii. The existence of a significant uncertainty (other than going concern), the resolution of which is dependent upon future events and which may affect the FS;
Circumstances which require the issuance of a modified opinion: i. There is a limitation on the scope of the auditor's work >> could lead to a qualified opinion or a disclaimer of opinion; ii. There is a disagreement with management regarding the acceptability of the accounting policies selected, the method of their application or the adequacy of the financial statement disclosures. >> could lead to a qualified opinion or an adverse opinion.
A qualified opinion: a) Disagreement with management; b) Limitation on scope Not so material and pervasive as to require an adverse opinion or a disclaimer of opinion. Expressed as being ''Except for'' the effects of the matter to which the qualification relates.
A disclaimer of opinion: a) Limitation on scope So material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is unable to express an opinion on the financial statements.
the auditor's report should describe the limitation and indicate the possible adjustments to the financial statements that might have been determined to be necessary had the limitation not existed.
An adverse opinion: a) Disagreement with management So material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.
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