ACCA AAA · Chapter 25
The Auditor’s Report 3: Types of Audit Opinion
Your chapter at a glance. Open any section, or keep the whole map in view.
From evidence to opinion
Opinion decision cause × pervasiveness
Evaluate findings
- Accumulate misstatements except clearly trivial items
- Request correction; assess uncorrected items in aggregate
- Consider qualitative materiality and disclosure
- Evaluate whether sufficient appropriate evidence obtained
Conclude
- Financial statements as a whole and relevant framework
- Materiality and pervasiveness determine opinion
When appropriate
- Sufficient appropriate audit evidence obtained
- Financial statements free from material misstatement
- Opinion states true and fair view/present fairly
Separate reporting
- Going Concern, MURGC, KAM and EoM may accompany it
- Those sections do not themselves modify opinion
Sufficient evidence shows misstatement
- Material, not pervasive → qualified opinion
- Material and pervasive → adverse opinion
Basis section
- Describe and quantify effects where practicable
- Explain why disclosures or accounting are deficient
- Qualified wording: except for the effects of the matter
Possible undetected misstatements
- Material, not pervasive → qualified opinion
- Material and pervasive → disclaimer of opinion
Scope limitation
- Seek alternative evidence and discuss with management
- Consider withdrawal where permitted and appropriate
- Qualified: except for possible effects
- Disclaimer: do not express an opinion
Wording and special cases
Modified opinions reason → extent → wording
A matter is pervasive when
- Not confined to specific elements or disclosures
- If confined, represents substantial proportion
- Fundamental to users’ understanding of financial statements
Materiality
- Consider size, nature and circumstances
- Assess the financial statements as a whole
Explain the reason
- Material misstatement: describe and quantify effect
- Lack of evidence: explain why evidence unavailable
- Use Basis for Qualified/Adverse/Disclaimer heading
Wording
- Adverse: financial statements do not present fairly
- Disclaimer: auditor does not express opinion
- Do not confuse actual with possible effects
Before issuing modification
- Discuss matter and request correction or evidence
- Communicate expected modification to TCWG
- Assess whether alternatives resolve limitation
Group audit
- Component qualification does not automatically modify group opinion
- Evaluate group materiality and alternative evidence
- Group auditor remains responsible for group opinion
Exam sequence
- Identify finding and correct accounting treatment
- Decide actual misstatement or missing evidence
- Evaluate materiality and pervasiveness
- Choose opinion and explain Basis section
Check other reporting
- Going concern implications addressed in Chapter 24
- Additional sections and placement addressed in Chapter 23
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