CHAPTER 11:

THE AUDITOR'S REPORT ON

FINANCIAL STATEMENT
• to express an opinion about whether the FS are
prepared, in all material respects, in accordance with
the applicable FRF.

• The FRF provides a context for the auditor's

evaluation of the fair presentation of the FS.

• Without this framework, the auditorwould not have

a benchmark for evaluating the fairness of the FS.
PSA 700 - is used to form unmodified audit
opinion; and

PSA 705 is the guidance that should use by

the auditor to issue a modified opinion.
Unmodified opinion is expressed to the financial
statements that prepared in all material respect
and complying with the applicable framework.

All material respect here means there is no

material misstatement in the financial statements,
but there might be an immaterial misstatement.
Basic Elements of Unmodified Report:
1. Title
2. Addressee
3. Auditor's opinion
4. Basis for opinion
5. Responsibilities for the Financial statements
6. Auditor's responsibilities for the audit of the FS.
7. Other reporting responsibilities
8. Auditor's signature
9. Auditor's address
10.Date of the report
Modifications to the Opinion
The unmodified opinion is issued only when the auditor is
satisfed that:
1. The financial statements have been prepared in accordance
with the applicable financial reporting
framework such as PFRS; and
2.The auditor was able to conduct the audit in accordance
with PSA.

Failure to meet any of the above requirements will cause the

auditor to modify his opinion on the financial statements.
 Material misstatement / Departure from PFRS
Any departure from the specific requirements of the reporting framework will
cause the financial statcments to contain material misstatement.

A material misstatement of the financial statements may arise from:

1. Inappropriate accounting policy selected;
2. Misapplication of selected accounting policy; or
3. Inappropriate or inadequate disclosure.

Material misstatement
Inform the entity and insist to revise the FS. If they refuse, auditor should
express qualified or an adverse opinion depending on materiality and
pervasiveness of effects of the misstatements on the FS.
Scope of limitation
- when auditor is unable to perform necessary audit
procedures required by PSA.
• Client Imposed Scope Limitation - management sometimes
prevents the auditor from performing certain audit procedures
which are essential to support the auditor's opinion. Auditor
should request the management to remove limitation.

• Circumstance Imposed Scope Limitation - the auditor may

encounter circumstancesthat may affect his ability to obtain
sufficient appropriate evidence.
•nature or timing of auditor's work
•beyond the control of the entity
Materiality and Pervasiveness Consideration
Effect of misstatement is significant enough - qualified opinion.
Effect of misstatement is highly material - adverse opinion.
PSA 705 provides clear guidelines on how the report should be
modifed when the auditor expresses modified opinions.
A. OPINION SECTION
Qualified Opinion Due to Material Misstatement
When the auditor expresses a qualified opinion due to a material
misstatement, the auditor shall:
• use the heading “Qualified Opinion" in the opinion section of the
teport; and
• state that, in the auditor's opinion,except fot the effects of the
matter described in the Basis for Qualified Opinion section,the
financial statements present fairly, in all material respects,the
financial position and Enancial performance of the entity in
accordance with the applicable financial reporting framework.
Qualified Opinion Due to Scope Limitation
When the auditor expresses a qualified opinion due to a
scope limitation, the auditor shall:
use the heading "Qualified Opinion" in the opinion
• section of the report, and
• state that, in the auditor's opinion, except for the possible
effects of the matter described in the Basis for Qualified
Opinion section,the financial statements present fairly, in
all material respects,the Financial position and financial
performance of the entity in accordance with the
applicable financial reporting framework.
THANK YOU