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Sri Lanka Auditing Standard 700


The Auditors Report on
Financial Statements
Effective for all audits commencing on or after 01
January 2010
15 October 2012
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Introduction
SLAUS 700
The auditor should review and assess the conclusions drawn from the audit
evidence obtained as the basis for the expression of an opinionon the financial
statements.
Financial Statements Prepared in accordance with an acceptable
financial reporting framework i.e. SLAS or relevant other standards or
practices
Financial Statements comply with Statutory requirements
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
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SLAUS 700
Basic Elements of the
Auditors Report
SLAUS 700
TheAuditReport
The Auditors Report
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Anexample
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SLAUS 700
The Auditors Report
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
SLAUS 700
The Auditors Report
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
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SLAUS 700
The Auditors Report
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
IntroductoryPara
contd.
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Unlessotherwisestatedtheauditingstandardsor
practicesfollowedarepresumedtobethoseof
thecountryindicatedbytheauditorsaddress.
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Unqualified opinion
Indicated implicitly that any changes in accounting principles or the
method of their application, and the effects thereof, have been
properly determined and disclosed in the financial statements.
SLAUS 700
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Auditcompletion
datesameasthe
management
approvaldate
Address
AuditorsSignature
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
ModifiedReports
Mattersthatdonotaffecttheauditors
opinion
Emphasisofmatter
Mattersthatdoaffecttheauditorsopinion
Qualifiedopinion
Disclaimerofopinion
Adverseopinion
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Emphasisofmatter
Presented
After theopinionpara.
Used
to highlightamatteraffectingthefinancialstatementsthatismoreextensively
discussesthemattersinanote.
When
Significantuncertaintytheresolutionofwhichisdependentuponfutureevents
materialmatterregardingGoingconcern
Mattersotherthanthoseaffectingfinancials
E.g.amendmenttoanotherinformationinadocumentandentityrefusestomake
theamendment
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
MattersthatDoaffecttheAuditors
Opinion
Materialmatter
Limitationonthescopeofthe
auditorswork
Disagreementwithmanagementre
acceptabilityoftheaccountingpolicies
selected
andthemethodoftheirapplication
ortheadequacyofdisclosures
Qualified
opinion
Disclaimer
opinion
Qualified
opinion
Adverse
opinion
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Qualified
opinion
Auditorconcludesthatan
unqualifiedopinioncannotbe
expressedbutthattheeffect
notsomaterialandpervasive
astorequireanadverseor
disclaimerofopinion.
Expressedasbeingexceptfor
theeffectsofthematter
Acleardescriptionofallthe
substantivereasonsshould
beincludedinthereport
andunlessimpracticable,a
quantificationofthe
possibleeffect(s)onthe
financialstatements
precedingtheopinion.(if
disclaimerreferencetoa
moreextensivediscussion
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Disclaimer
opinion
Limitationofscopeisso
materialandpervasivethatthe
auditorhasnotbeenableto
obtainsufficientappropriate
auditevidenceandaccordingly
unabletoexpressanopinion.
Significantmultiple
uncertainties
Acleardescriptionofallthe
substantivereasonsshouldbe
includedinthereportand
unlessimpracticable,a
quantificationofthepossible
effect(s)onthefinancial
statements precedingthe
opinion.(ifdisclaimer
referencetoamoreextensive
discussion
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Adverse
opinion
Effectofadisagreementisso
materialandpervasivethatthe
auditorconcludesthatthe
qualificationoftheauditreport
isnotadequatetodisclosethe
misleadingorincompletenature
ofthefinancialstatements.
Acleardescriptionofallthe
substantivereasonsshouldbe
includedinthereportand
unlessimpracticable,a
quantificationofthepossible
effect(s)onthefinancial
statements precedingthe
opinion.(ifdisclaimer
referencetoamoreextensive
discussion
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Limitation
ofscope
Imposedbytheentity
Iftheauditorbelievesthatthe
termsoftheproposed
engagementresultsina
disclaimeropinionAUDITOR
ordinarilyNOTACCEPTsuchan
engagement.
Imposedbycircumstance
e.g.timingoftheauditors
appointmentissuchthatthe
auditorisunabletoobserve
inventorycount
ORaccoutning recordsare
inadequate(attemptalternative
procedures)
Auditorshoulddescribethe
limitation.
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Exceptasdiscussedinafollowingparagraph,wehaveobtained
alltheinformationandexplanationswhichtothebestof
ourknowledgeandbeliefwerenecessaryforthepurposes
ofouraudit.Wethereforebelievethatourauditprovidesa
reasonablebasisforourqualifiedopinion.
Wedidnotobservethecountingofthephysicalinventoriesasof
March31,20X9,sincethatdatewaspriortothetimewe
wereinitiallyengagedasauditorsfortheCompany.Owingto
thenatureoftheCompanysrecords,wewereunableto
satisfyourselvesastoinventoryquantitiesbyotheraudit
procedures.
Inouropinion,sofarasappearsfromourexamination,exceptfor
theeffectsofsuchadjustments,ifany,asmighthavebeen
determinedtobenecessaryhadwebeenabletosatisfy
ourselvesastophysicalinventoryquantities,theCompany
maintainedproperaccountingrecordsfortheyearended
March31,20X9andthefinancialstatementsgiveatrueand
...(remainingwordsarethesameasillustratedintheopinion
paragraph paragraph28above).
Limitation
ofscope
Qualified
opinion
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
(Omitthesentencestatingtheresponsibilityoftheauditor).
(Theparagraphsdiscussingthescopeoftheauditandbasisof
opinionwouldeitherbeomittedoramendedaccordingto
thecircumstances.)
Wehavenotobtainedadequateinformationandexplanationsas
discussedinthefollowingparagraph,forthepurposesofour
audit.Wethereforebelievethatourauditprovidesa
reasonablebasisforourdisclaimerofopinion.
(Addaparagraphdiscussingthescopelimitationasfollows:)
Wewerenotabletoobserveallphysicalinventoriesandconfirm
accountsreceivableduetolimitationsplacedonthescopeof
ourworkbytheCompany.
Becauseofthesignificanceofthemattersdiscussedinthe
precedingparagraph,wedonotexpressanopiniononthe
financialstatementsofthecompany.
Limitation
ofscope
Disclaimer
opinion
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
Acceptabilityofaccounting
policies
Method
Adequacyofdisclosures
Auditorshoulddescribethe
limitation.
Disagreement
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
AsdiscussedinNoteXtothefinancialstatements,no
depreciationhasbeenprovidedinthefinancial
statementswhichpractice,inouropinion,isnotin
accordancewithSriLankaAccountingStandards.The
provisionfortheyearendedMarch31,20X9,shouldbe
xxxbasedonthestraightlinemethodofdepreciation
usingannualratesof5%forthebuildingand20%for
theequipment.Accordingly,thefixedassetsshouldbe
reducedbyaccumulateddepreciationofxxxandthe
lossfortheyearandaccumulateddeficitshouldbe
increasedbyxxxandxxx,respectively.
Inouropinion,sofarasappearsfromourexamination,
exceptfortheeffectonthefinancialstatementsofthe
matterreferredtointheprecedingparagraph,the
Companymaintainedproperaccountingrecordsfor
theyearendedMarch31,20X9andthefinancial
statementsgiveatrueand...(remainingwordsarethe
sameasillustratedintheopinionparagraph
paragraph28above).
Qualified
opinion
Disagreement
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SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
OnJanuary15,20X9,theCompanyissueddebentures
intheamountofxxxforthepurposeoffinancing
plantexpansion.Thedebentureagreement
restrictsthepaymentoffuturecashdividendsto
earningsafterMarch31,20X3.Inouropinion,
disclosureofthisinformationisrequiredby...
Inouropinion,sofarasappearsfromour
examination,exceptfortheomissionofthe
informationincludedintheprecedingparagraph,
theCompanymaintainedproperaccounting
recordsfortheyearendedMarch31,20X9and
thefinancialstatementsgiveatrueand...
(remainingwordsarethesameasillustratedin
theopinionparagraph paragraph28above).
Refertotherelevantstatuteorlaw.
Qualified
opinion
Disagreement
disclosure
SLAUS 700
The auditors report should contain a clear written expression of opinion on
the financial statements as a whole
(Paragraph(s)discussingthe
disagreement).
Inouropinion,sofarasappearsfrom
ourexamination,becauseofthe
effectsofthemattersdiscussedin
theprecedingparagraph(s),the
financialstatementsdonotgivea
trueandfairviewoftheCompanys
stateofaffairsasatMarch31,20X9
anditsprofitandcashflowsforthe
yearthenendedinaccordancewith
SriLankaAccountingStandards.
Disagreement
disclosure
Adverse
opinion
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Thank you.