Chapter 5

COMPLETING AND
REPORTING THE AUDIT

Auditing Dept. - School of Accounting

- UEH

1
 ISA/VSA 550 Related parties

Relevant guidance
ISA/VSA 560 Subsequent events

ISA/VSA 570 Going concern

ISA/VSA 580 Written Representation

ISA/VSA 700 Forming an opinion and reporting on a financial

report
ISA/VSA 705 Modifications to the opinion in the
independent auditor’s report
ISA/VSA 706 Emphasis of Matter paragraphs and other
matter paragraphs in the independent auditor’s
report
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LEARNING 1. Understand the structure and qualitative
characteristics of the auditor’s report
OBJECTIVES
2. Identify the different types of auditor’s
reports
3. Describe the circumstances under which an
auditor would issue each type of report
4. Identify the reasons for departures from a
standard unmodified auditor’s report,
material misstatements and limitations
imposed on the scope of the audit, and
understand the factors giving rise to these
reasons.

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CONTENT
v Completion and review before issuing
the auditor’s report
Audit planning v The auditor’s report
° Definition
° Structure and qualitative
Audit characteristic of the auditor’s report
performance ° Types of auditor’s opinion

Audit
completion

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 Completion and review before issuing the auditor’s report

1. Applying analytical procedures in the completion of the audit

2. Assessing the sufficiency of audit evidence
3. Evaluating the effects of unadjusted misstatements
4. Reviewing subsequent events, examining related-party
transactions, assessing the appropriateness of the going concern
assumption
5. Reviewing audit working papers
6. Obtain management representation letters
7. Reviewing the financial statements and other information
contained in the annual report
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 DEFINITION • Audit report is the written report
made by practicing auditors, auditing
OF THE firms, branches of foreign auditing
firms in Vietnam after the completion
AUDITOR’S of the audit, giving opinions on
REPORT financial statements and other
contents which have been audited
under the audit contract.
(Law No 67/2011/QH12 on
Independent Auditing)

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Auditing Dept. - School of Accounting - UEH
 Elements of an auditor’s report

1. Reference number of an Auditor’s report

2. Title
3. Addressee
4. Introductory paragraph
5. Management’s Responsibility for the financial statements
6. Auditor’s Responsibility
7. Auditor’s Opinion
8. Signature of the Auditor
9. Date of the Auditor’s Report
10. Auditor’s Address

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 1. Reference number of an auditor’s report
It is the number of an auditor’s report issued
by his audit firm.
2. Title
“Independent Auditor’s Report”, affirms that
the auditor has met all of the relevant ethical
Elements of requirements regarding independence;
an auditor’s therefore, distinguishes the independent
auditor’s report from reports issued by
report others.
3. Addressee
The auditor’s report is normally addressed to
those for whom the report is prepared, often
to shareholders or to those charged with
governance of the entity (Supervisory Board
or Board of Directors).

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 4. Introductory paragraph
• Identify the entity whose the financial
statements have been audited.
• State the audited financial statements
Elements of including the title of each report comprising
the complete set of financial statements).
an auditor’s
• Specify the date or period covered by each
report financial statement.
• State the issuing date of the financial
statements.
• Identify the page number on which the
auditor’s report and the financial
statements are presented.

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 • Example of the Introductory para.
We have audited the accompanying
financial statements of ABC Company,
prepared on 28 Feb 20X2, as set out from
page … to page …, which comprise the
Elements of statement of financial posistion as at
an auditor’s December 31, 20X1, and the statement
of comprehensive income, statement of
report changes in equity and statement of cash
flows for the year ended, and a summary
of significant accounting policies and
other explanatory information.

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 5. Management’s Responsibility for the
financial statements
Management and those charged with
governance accept responsibility for the
preparation of the financial statements in
Elements of accordance with the applicable financial
an auditor’s reporting framework.
report They are also responsible for such
internal control which is necessary to
enable the preparation of the financial
statements that are free from material
misstatments, whether due to fraud or
error.

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 • Example of 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
Elements of (Vietnamese Accounting Standards,
an auditor’s accounting regime for enterprises and legal
regulations relating to financial reporting)
report and for such internal control as
management determines is necessary to
enable the preparation of financial
statements that are free from material
misstatements, whether due to fraud or
error.

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 6. Auditor’s responsibility
• The responsibility of the auditor is to express an
opinion on the financial statements based on the
audit.
• To give audit opinion, auditor needs to:
• Make reference to the audit standards were
Elements of used

an auditor’s • State the Objectives of an audit

• Provide a description of audit work has been
report performed
• Evaluate risk of material misstatements of the
financial statements, including the evaluation
of internal control.
• Evaluate the appropriateness of the
accounting policies used and the
reasonableness of accounting policies.
• Evaluate the overall presentation of the
Auditing Dept. - School of Accounting - UEH financial statements. 13
 • Example of 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/Vietnamese Standards on Auditing. Those
standards require that we comply with ethical
requirements and plan and perform the audit to obtain
reasonable assurance about the financial statements are
free from material misstatement.
Elements of An audit involves performing procedures to obtain audit
evidence about the amount and disclosures in the
an auditor’s financial statements. The procedures selected depends
on the auditor’s judgment, including the assessment of
report the risks of material misstatement of the financial
statements, whether due to fraud or error. In making
those risk assessments, the auditor consider 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
circumstance, 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
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 7. Signature of the auditor
• The auditor’s signature is either in the
name of the audit firm, the personal
name of the auditor or both, as
Elements of appropriate for the particular
an auditor’s jurisdiction.
report • In addition, there may be declaration of
the auditor’s professional accountancy
designation or recognisation of the
appropriate licensing authority in that
jurisdiction.

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 8. Date of the auditor’s report
Elements of To inform users that the auditor has
an auditor’s considered the effect of events and
transactions of which the auditor
report became aware and that occurred up to
that date.

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 9. Auditor’s Address
Elements of
an auditor’s The auditor’s report shall name the
location in the jurisdiction where the
report auditor pratices.

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 Unmodified
Qualified opinion
opinion
Types of
auditor’s report
Modified
Adverse opinion
opinions

Disclaimer of
opinion
Emphasis of
matter Other
matter

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 1. Unmodified/Unqualified/Clean opinion
When the auditor is satisfied in all material respects that:

• The financial information has been prepared using

acceptable accounting policies, which have been consistently
applied (e.g. complies with the requirements of the
applicable financial reporting framework such as VASs or
IFRSs);
• The financial information complies with relevant regulations
AUDITOR’S and statutory requirements;

OPINION • Sufficient and appropriate audit evidence has been obtained;

• Any changes in accounting policies and their effects have
been considered and disclosed on the notes to financial
statements;

• There is adequate disclosure of all material matters relevant

to the proper presentation of the financial information.
à The F/S give a true and fair view (or present fairly, in all
material respects)

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 • Example of an Unmodified Opinion
In our opinion, the financial statements
present fairly, in all material respects, (or
give a true and fair view of) the financial
position of ABC Company as at December
AUDITOR’S 31, 20X1, and (of) its financial performance
OPINION and its cash flows for the year then ended
in accordance with International Financial
Reporting Standards (Vietnamese
Accounting Standards, accounting regime
for enterprises and legal regulations
relating to financial reporting).

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 2. Modified Opinion
The auditor shall modify the opinion when:
• The auditor concludes, based on the audit
evidence obtained, that the financial
statements as a whole are not free from
AUDITOR’S material misstatement; or
OPINION • The auditor is unable to obtain sufficient
appropriate audit evidence to conclude
that the financial statements as whole are
free from material misstatement.

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 AUDITOR’S OPINION

Financial statements are materially misstated

(disagreement with management regarding
application of accounting policies and disclosures)
Nature of the
matter giving
rise to the
modification

Inability to obtain sufficient appropriate

audit evidence (scope limitation)

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 AUDITOR’S OPINION
Modifications affecting the auditor’s opinion
Decision regarding types of
modified opinion

v The nature of the matter giving

Qualified rise to the modification:
opinion whether the financial
statements are materially
Adverse misstated or an inability to
opinion obtain sufficient appropriate
audit evidence.
Disclaimer of v The auditor’s judgment about
opinion the pervasiveness of the effects
or possible effects of the above
matters on the financial
statements.
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 AUDITOR’S OPINION

• Effects are considered to be pervasive if,

in the auditor’s judgment, they:
• Are not confined to specific
elements, accounts or items of the
financial statements
• If so confined, represent or could
represent a substantial proportion of
the financial statements
• In relation to disclosures, are
fundamental to users’ understanding
of the financial report

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 AUDITOR’S OPINION
Types of Modified Opinions (Materially/Pervasively)
Auditor’s judgment regarding the
Nature of matter giving rise pervasiveness of the effects or
to the modification possible effects on the financial
report
Material but not Material and
pervasive pervasive
Financial report is materially Qualified opinion Adverse
misstated (disagreement opinion
with management)
Auditor is unable to obtain Qualified opinion Disclaimer of
sufficient appropriate audit opinion
evidence (scope limitation)

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AUDITOR’S OPINION
• Nature of material misstatements
A material misstatement of the
financial statements may arise in
relation to:
a) The appropriateness of the
selected accounting policies;
b) The application of the selected
accounting policies; or
c) The appropriateness or adequacy
of disclosures in the financial
statements.

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 AUDITOR’S OPINION
Nature of inability to obtain
sufficient appropriate audit
evidence

A limitation on the scope of

the audit may arise from:
Circumstance
Circumstance relating to the
Limitation imposed
beyond the control nature or timing of
by management.
of the entity; the auditor’s work;
or

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 AUDITOR’S OPINION
2.a. Qualified opinion
• The auditor shall express a qualified
opinion when:
• The auditor, having obtained sufficient
appropriate audit evidence, concludes
that misstatements, individually or in
the aggregate, are material, but not
pervasive, to the financial statements;
or
• The auditor is unable to obtain
sufficient appropriate audit evidence
on which to base the opinion, but the
auditor concludes that the possible
effects on the financial statements of
undetected misstatements, if any,
could be material but not pervasive.
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AUDITOR’S OPINION
• Example of a qualified opinion
Basis for Qualified opinion
The company’s inventories are carried in the statement of financial position at
XXX. Management has not stated the inventories at the lower of cost and net
realisable value but has stated them solely at cost, which contribute a
departure from International Financial Reporting Standards. The company’s
records indicate that had management stated the inventories at the lower of
cost and net realisable value, an amount of ZZZ would have been required to
write the inventories down to their net realisable value. Accordingly, cost of
sales would have been increased by ZZZ, and income tax, net income and
shareholders’ equity would have been reduced by YYY, WWW and QQQ,
respectively.

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AUDITOR’S OPINION
• Example of a qualified opinion
Qualified opinion
In our opinion, except for the effects
of the matter described in the Basic
for Qualified Opinion paragraph, the
financial statements present fairly, in
all material respects, (or give a true
and fair view of) the financial position
of ABC Company as at December 31,
20X1, and (of) its financial
performance and its cash flows for
the year then ended in accordance
with International Financial Report
Standards.

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AUDITOR’S OPINION

2.b. Adverse opinion

The auditor shall express an adverse
opinion when the auditor, having
obtained sufficient appropriate audit
evidence, concludes that
misstatements, individually or in the
aggregate, are both material and
pervasive to the financial statements.

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 AUDITOR’S OPINION
• Example of an Adverse opinion
Basis for Adverse opinion
As explained in note X, the company has not
consolidated the financial statements of
subsidiary XYZ it acquired during 20X1 because
it has not yet been able to ascertain the fair
values of certain of the subsidiary’s material
assets and liabilities at the acquisition date.
This investment is therefore accounted for on
the cost basis. Under International Financial
Reporting Standards, the subsidiary should
have been consolidated because it is
controlled by the company. Had XYZ been
consolidated, many elements in the
accompanying financial statements would
have been materially affected. The effects on
the consolidated financial statements of the
failure to consolidate have not been
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AUDITOR’S OPINION
• Example of an Adverse opinion
Adverse opinion
In our opinion, because of the
significance of the matter discussed in
the Basis for Adverse opinion paragraph,
the consolidated financial statements do
not present fairly (or do not give the true
and fair view of) the financial position of
ABC Company and its subsidiaries as at
December 31, 20X1, and (of) their
financial performance and their cash
flows for the year then ended in
accordance with International Financial
Reporting Standards.
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AUDITOR’S 2.c. Disclaimer of opinion

OPINION The auditor shall disclaim an opinion

when the auditor is unable to obtain
sufficient appropriate audit evidence on
which to base the opinion, and the
auditor concludes that the possible
effects on the financial statements of
undetected misstatements, if any, could
be both material and pervasive.

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 • Example of a Disclaimer of opinion
Basis for Disclaimer of Opinion

AUDITOR’S The company’s investment in its joint venture XYZ

(Country A) is carried at XXX on the company’s
OPINION statement of financial position, which represent over
90% of the company’s net assets as at December 31,
20X1. We were not allowed access to the management
and the auditors of XYZ, including XYZ’s auditors’ audit
documentation. As a result, we were unable to
determine whether any adjustments were necessary in
respect of the company’s proportional share of XYZ’s
assets that it controls jointly, its proportional share of
XYZ’s liabilities for which it is jointly responsible, its
proportional share of XYZ’s income and expense for the
year, and the elements making up the statement of
changes equity and cash flows statement.

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AUDITOR’S • Example of a Disclaimer of opinion
OPINION Disclaimer of Opinion
Because of the significance of the matter
described in the Basis for Disclaimer of opinion
paragraph, we have not been able to obtain
sufficient appropriate audit evidence to provide
a basis for an audit opinion. Accordingly, we do
not express an opinion on the financial
statements.

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 • Form and content of the auditor’s report when the
opinion is modified
1. Basis for Modification paragraph is added
AUDITOR’S • This provides a description of the matter giving rise to
OPINION the modification.
• The auditor shall place this paragraph immediately
before the Opinion paragraph in the auditor’s report
and use the heading “Basis for Qualified opinion”,
“Basis for Adverse Opinion”, or “Basis for Disclaimer
opinion”, as appropriate.
• This may include a description and quantification of
the financial effects of the misstatement, unless
impracticable. If not practicable, the auditor shall also
state in the basis for modification paragraph.
• The auditor shall include in the basis for modification
paragraph the reasons for an inability to obtain
sufficient appropriate audit evidence, if any.
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 • Form and content of the auditor’s report when the opinion
is modified
AUDITOR’S 2. Change the title of Opinion paragraph
The auditor shall use the heading “Qualified
OPINION opinion”,”Adverse opinion”, or “Disclaimer of opinion”, as
appropriate, for the opinion paragraph.
3. Amend the description of the auditor’s responsibility
when a Qualified or Adverse opinion is issued
To state that the auditor believes that the audit evidence the
auditor has obtained is sufficient and appropriate to provide
a basis for that opinion.
3. Amend the introductory paragraph of the Disclaimer of
Opinion
To state that the auditor was engaged to audit the financial
statements. The auditor also amends the description of the
auditor’s responsibility and the description of the scope of
the audit.
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 • Example of amendment to the auditor’s
responsibility paragraph
“Our responsibility is to express an opinion on
the financial statements based on conducting
AUDITOR’S the audit in accordance with International
OPINION Standards on Auditing. Because of the matter(s)
in the Basis for Disclaimer of Opinion
paragraph, however, we were not able to obtain
sufficient appropriate audit evidence to provide
a basis for an audit opinion.”

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AUDITOR’S OPINION

• “Emphasis of
matter” &
• “Other matter”

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EMPHASIS OF MATTER
In the auditor’s judgment,
To draw user’s that matter is of such
attention to a matter important that it is
appropriately fundamental to users’
understanding of the
presented or
financial statements
disclosed in the
financial statements

The auditor has obtained

sufficient appropriate
audit evidence that the
matter is not materially
misstated in the F/S

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EMPHASIS OF • Circumstances where the auditor may consider it
necessary to include an Emphasis of Matter
MATTER paragraph are:
a) An uncertainty relating to the future
outcome of eceptional litigation or
regulatory action.
b) Early application (where permitted) of a
new accounting standard (for example, a
new IFRS) that has a pervasive effect on the
financial statement in advance of its
effective date.
c) A major catastrophe that has had, or
continues to have, a significant effect on
the entity’s financial position.
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 • Example of Emphasis of Matter
Emphasis of Matter
EMPHASIS OF We draw attention to Note X to the
MATTER financial statements which describes the
uncertainty related to the outcome of the
lawsuit filed against the company by XYZ
Company. Our opinion is not qualified in
respect of this matter.

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OTHER MATTER
To draw users’ Those matters are
attention to any relevant to users’
matter or matters understanding of the
other than those audit, the auditor’s
presented or disclosed responsibility or the
in the financial auditor’s report
statements

And this is not

prohibited by
law or
regulation

“Other matter”
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 • Circumstances in which an Other matter
paragraph may be necessary
• Relevant to users’ understanding of the
audit (unable to withdraw from an
engagement due to scope limitation
imposed by management)
• Relevant to users’ understanding of the
OTHER MATTER auditor’s responsibility or the auditor’s
report
• Reporting on more than one set of
financial statements
• Restriction on distribution or use of the
auditor’s report

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EXERCISE

•12.19
•12.20
•12.21
•12.25

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