PSA 700

FORMING AN OPINION AND REPORTING ON FINANCIAL

STATEMENTS

FOCUS NOTES:

• In an audit of historical financial information, the objectives of the auditor are:

This is a process where an auditor reviews a company’s past financial data to form an opinion about the
accuracy and reliability of the financial statements.
(a) To form an opinion on the financial statements based on an evaluation of the
conclusions drawn from the audit evidence obtained; The auditor examines the evidence
collected during the audit to form an opinion on whether the financial statements are accurate and fair.
And
(b) To express clearly that opinion through a written report. The auditor then
communicates this opinion clearly through a written report, often referred to as the auditor’s report
• “General purpose financial statements” are financial statements prepared in
accordance with a general-purpose framework. These are financial statements prepared
according to a general-purpose framework. They are designed to meet the needs of a wide range of users,
such as investors, creditors, and regulators, who need this information to make financial decisions.
• General purpose framework – A financial reporting framework designed to meet the
common financial information needs of a wide range of users. The financial reporting
framework may be a fair presentation framework or a compliance framework This is a set of
guidelines for financial reporting. It can be a fair presentation framework (which requires a true and fair view
of the financial statements) or a compliance framework (which requires compliance with the provisions of
laws or regulations).
• Unmodified opinion – The opinion expressed by the auditor when the auditor concludes
that the financial statements are prepared, in all material respects, in accordance with
the applicable financial reporting framework. This is the best type of report an auditor can issue. It
means that the financial statements are prepared, in all material respects (meaning significant or important
aspects), in accordance with the applicable financial reporting framework. In other words, the auditor found
no significant errors or misrepresentations in the financial statements.

• Requirements:
- The auditor shall form an opinion on whether the financial statements are
prepared, in all material respects, in accordance with the applicable financial
reporting framework.
- To form an opinion, auditor shall conclude whether he has obtained reasonable
assurance about whether the FS as whole is free from material misstatement,
whether due to fraud or error. That conclusion shall take into account the
following evaluations:
- 1. Evaluate the sufficiency and appropriateness of evidence The auditor needs to
evaluate whether the evidence collected during the audit is sufficient and appropriate to support their
opinion
 2. Evaluate whether uncorrected misstatements are material, individually or in
aggregate
3. Evaluate whether the financial statements are prepared, in all material
respects, in accordance with the requirements of the applicable financial
reporting framework.
4. Evaluate whether the financial statements appropriately disclose the significant
accounting policies selected and applied.
5. Evaluate whether the accounting policies selected and applied are consistent
with the applicable financial reporting framework and are appropriate
6. Evaluate whether the accounting estimates made by management are
reasonable;
7. Evaluate whether the information presented in the financial statements is
relevant, reliable, comparable, and understandable.
8. Evaluate whether the financial statements provide adequate disclosures to
enable the intended users to understand the effect of material transactions and
events on the information conveyed in the financial statements.
9. Evaluate whether the terminology used in the financial statements, including the
title of each financial statement, is appropriate.
10. Evaluate whether the financial statements achieve fair presentation (overall
presentation, structure and content of the financial statements and whether the
financial statements represent the underlying transactions and events in a
manner that achieves fair presentation).
Evaluate whether the financial statements adequately refer to or describe the applicable financial
reporting framework.