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Hello
On Pilot Paper, question nr. 2 – c is:
State three ways in which an auditor’s report may be modified and briefly explain the use of each
modification.and the answer is
Emphasis of matter paragraph. Used where the auditor wishes to draw attention to an important item in the financial
statements.
Qualification – limitation in scope. Used where the audit cannot obtain sufficient evidence regarding an item in the financial
statements.
Qualification – disagreement. Used where the auditor disagrees concerning the amount or disclosure of an item in the financial
statements.I don’t understand why Emphasis of matter parapgraph is considered as a Modified Report, because from my understanding is that Emphasis of matter paragraph is Unmodified Report.
Can you please explain.
Thank you
ArijetaYou have to distinguish between a modified/unmodified opinion and a modified/unmodified report.
The opinion (eg the FS show a true and fair view…) is only a small section of the whole report. If the opinion is modified, the report is modified, because the opinion is part of the report. Opinions are modified because of a material misstatement (used to be called disagreement) or insufficient appropriate audit evidence (used to be called limitation of scope).
An emphasis of matter is an additional paragraph to the audit report, but it does not modify the opinion. It simply draws attention to an important matter in the FS.
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