ISA 700 - Forming an Opinion and Reporting on Financial Statements

Question 1

ISA 700: Objective 1 & Objective 2:

Answer 1

Objective 1:
> Form an Opinion.

Objective 2:
> Express the Opinion through a written Report.

> Consistency of the Audit Report
* Must promote consistency so that the various Audit reports have,
** Comparability,
** Understandability.

Question 2

ISA 700 Series: General Purpose Financial Statements:

Answer 2

Common Users:
General Purpose Financial Statements:
1. Fair Presentation Framework:
For Example:
Schedule 111
> Additional Disclosures,
> Depart from the Framework for Fair Presentation.
* Fair Presentation, we use the terms:
True & Fair View.

2. Compliance Framework:
   For example:
   * Banking Regulations Act 1949:
   > No Additional Disclosures.
   > No departure from the Framework.
   * With Compliance Framework we use the terms:
   Complied with FRF. Thus the language of Reporting will change.

ISA 700&raquo_space; Unmodified Opinion
ISA 705&raquo_space; Modified Opinion
ISA 701&raquo_space; Key Audit Matters,
ISA 706&raquo_space; Emphasis of Matters & Other Matters.

ISA 800: Special Purpose Financial Statements.

Question 3

ISA 700: Objective 1:

Answer 3

Objective 1:
Form an Opinion

Objective of an Auditor - ISA 200:
> Obtain Reasonable Assurance that Financial Statements as a whole are free from Material Misstatements whether due to Fraud or Error.
1. Obtain Sufficient and Appropriate Audit Evidence - ISA 330.
2. Evaluate the Misstatements identified during the Audit - ISA 450.
3. Evaluate that:
» Financial Statements are prepared in all Material respects in accordance with Applicable Reporting Framework, (Including Qualitative Aspects).
» Appropriateness of Accounting Policies used.
» Reasonableness of Accounting Estimates.
» Relevance, Reliability, Understandability, Comparability of disclosures.
» Adquacy of notes to Accounts.
» Appropriate terminologies.
4. Adequate description of the Applicable Financial Reporting Framework in the FS.

Unmodified Opinion where the Auditor is saying the FS show a True & Fair View.

Modified Opinion is where the FS do not give a True & Fair View.

Question 4

ISA 700: Objective 2

Answer 4

Objective 2:
Express the Opinion through a Written Report:

This Standard divides the Reports into 3:
1. Audit conducted as per ISAs.
Contents of the Audit Report:
a) Title
b) Addressee
c) Opinion
» Introductory Paragraph
**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 FS.
** Refer to the notes, including the summary of Significant Accounting Policies.
** Specify the date or period covered by each FS.
» Opinion (Fair Presentation/ Compliance):
For Example:
** We have audited the standalone FS of ABC Company Limited (“the Company “) which comprise the balance sheet as at 31 March 2022 and the Statement of Profit/ Loss, Statement of Changes in Equity, and Statement of Cash Flows for the year then ended, and notes to the FS, including a summary of Significant Accounting Policies and other explanatory information.
Option 1:
In our Opinion, the accompanying FS present fairly, in all material respects, in accordance with the Applicable Financial Reporting Framework.

Option 2:
In our Opinion, the accompanying FS give a True & Fair View in accordance with the Applicable Financial Reporting Framework.

Using Compliance Framework:
In our Opinion, the accompanying Financial Statements have complied with the requirement of Applicable Financial Reporting Framework.

4. Basis of Opinion Paragraph:
   Reason for Opinion:
   > Audit was conducted in accordance with SAs
   > Refers to the section of the Auditor’s Report that describes the Auditor’s responsibilities under the ISAs.
   > Includes a statement that the Auditor is Independent of the Entity in accordance with the relevant Ethical Requirements relating to the Audit (Also refers to Code of Ethics issued by ZICA).
   > States 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.
5. Going Concern Paragraph (ISA 570)
6. Key Audit Matters (ISA 701)
7. Other information (ISA 720)
8. Management’s Responsibility:
   » Preparing the FS in accordance with the Applicable Financial Reporting Framework.
   » Design Internal Controls to enable the preparation of Financial Statements that are free from Material Misstatement, whether due to Fraud or Error.
   » Assessing the Entity’s ability to continue as a Going Concern.
   Disclose Applicable matters relating to Going Concern.
   » Preparation of FS that give a True and Fair View.
   » Sometimes includes TCWG (Based on legal Framework of the Entity)
9. Auditor’s Responsibility:
   a) Primary Objective of the Auditor:
   i) Obtain Reasonable Assurance and to issue an Auditor’s Report that includes the Auditor’s Opinion.
   ii) State that Reasonable Assurance is a High Level of Assurance, but is not a guarantee that an Audit will always detect a material Misstatement when it exists.
   iii) State that material Misstatements can arise from Fraud or Error.
   iii.a) Considered material if, individually or in the aggregate could influence the economic decisions of users.
   iii.b) Provide a definition or description of Materiality in accordance with the applicable Financial Reporting Framework.

9.b) Audit Procedures:
i) State that the Auditor exercises Professional Judgement and maintains Professional Scepticism throughout the Audit.
II) Auditor’s Responsibilities are:
9.ii.a) To identify and assess the risks of Material Misstatement.
9.ii.b) To obtain Audit Evidence.
9.ii.c) State that the risk of not detecting a material Misstatement resulting from Fraud is Higher than for one resulting from Error.
9.ii.d) Obtain understanding of Internal Control relevant to the Audit in order to design Audit Procedures.
State that the consideration is not for the purpose of expressing an Opinion on the effectiveness of the Entity’s Internal Controls.

9.iii. To Evaluate the :
9.iii.a) Approapriateness of Accounting Policies used.
9.iii.b) Reasonableness of Accounting Estimates and related Disclosures.

9.iv) Conclude on the Approapriateness of Management’s use of the Going Concern basis of Accounting.
» The Auditor’s conclusions are based on the Audit Evidence obtained up to the date of the Auditor’s Report.

9.v) When the FS are prepared in accordance with a Fair Presentation Framework, to evaluate:
9.v.a) Overall Presentation, Structure and Content of FS.

9.vi) Auditor’s Responsibility:
** Communication with TCWG.
» Planned Scope.
» Timing of the Audit.
» Significant Audit findings, including any significant deficiencies in Internal Controls.
» Auditor has complied with relevant Ethical Requirements.
» Relationships and other Matters that may reasonably be thought to bear on the Auditor’s Independence.
» Key Audit Matters are communicated in accordance with ISA 701 ( Most Significant)

10. Other Reporting Responsibilities:
    Additional Reporting Requirements:
    For Example:
    » CARO 2020.
    » Section 143 (3) of Companies Act 2013.
    » Rule 11 in Companies (Audit and Auditors) Rules, 2014.
11. Signature of the Audit Partner.
    » Signed by the Auditor
    (Engagement Partner) in his personal Name and Membership Number.
    » Firm’s name & Registration number.
12. Place of Signature
    » Specific Location, which is ordinarily the city where the Audit Report is signed.
13. Date of Auditor’s Report
    » This date must not be earlier than the date on which the Auditor has obtained Sufficient and Appropriate Audit Evidence on which to base the Auditor’s Opinion on the FS.
    » Not earlier of FS including the related notes, have been prepared.
    » Not earlier of Approval by Management.
14. Audit conducted as per Law & Regulations.
15. Audit conducted with both SAs and ISAs.

Question 5

ISA 700: Audit Report prescribed by Law or Regulations:

Answer 5

Auditor’s Report shall refer to ISAs only if the Auditor’s Report includes at a minimum, each of the following elements:
1. Title
2. Addressee.
3. Auditor’s Opinion
4. Basis of Opinion
5. Going Concern (ISA 570)
6. Key Audit Matters (ISA 701)
7. Other Information (ISA 720)
8. Management’s Responsibilities
9. Auditor’s Responsibilities
10. Other Responsibilities
11. Signature of the Auditor
12. Place of Signature
13. Date of the Audit Report.

Iii) Auditor’s Report for Audits conducted in accordance with both ISAs issued by ZICA and International Standads on Auditing.

Refer to SAs in addition to the ISAs only if:
» No conflict between SAs and ISAs.
» The Auditor’s Report includes, at a minimum, 13 elements set out in SAs.

Supplementary Information:
» Information presented with the Financial Statements.
» Not required by the Applicable Financial Reporting.
» It can be an Integral part of FS.
» It can also Not be an Integral part of FS.

Cover by the Auditor’s Opinion.
Whether that information sufficiently and clearly differentiates it from the FS.

Give the Opinion depending upon scope.
Request Management to change the presentation.
If they refuses, explain in the Report that such supplementary information has not been Audited.

The supplementary Report can be Within the body of the Auditor’s Report.
Or it can be within an Appendix to the Auditor’s Report (Include reference in the Report.)
Location of Description on a website (include reference in the Report)

This is all about ISA700:
Forming an Opinion and Reporting on Financial Statements.

ISA 700 specifically reports about Unmodified Opinion.

ISA 705 - Modified Opinion.