Auditor’s opinion on

the Financial
Statements
Audit Approach
 The manner in which the evidence in
relation to each material financial
statement assertion is to be gathered and
evaluated during the final three (3) stages.
 Refers to the planned extent to which
reliance will be placed on
◦ Management’s internal control procedures
◦ Tests of transactions underlying account
balances
◦ Extent of analytical procedures
 Approach for each assertion relating to each
account balances is determined by the
auditor during the audit planning stage.
Audit Approaches
 Top Down Approach – starts with strategic
issues
 Balance sheet approach
 Transaction cycle approach
 Systems approach
 Verification or substantive approach
 Risk-based audit approach
 Financial risk-analysis approach
 Strategic business risk approach
 Continuous audit approach
 In-depth vs Non in-depth audit approach
 Analytical vs non-analytical audit approach
Financial Statements
 A structured representation of the
financial information, which ordinarily
includes accompanying notes, derived from
accounting records and intended to
communicate an entity’s economic
resources or obligations at a point in
time in accordance with a financial
reporting framework.
Auditor’s report
 Communicates the auditor’s opinion
concerning the FS to the users of those
FS
 Addressed to the parties who retained the
auditors (SH and BOD).
 Dated as of the last day of the CPA’s
field work
 Signed by the partner of the CPA firm
Types of Opinion
 Unqualified opinion
◦ Expressed when the auditor concludes that the FS
give a true and fair view or are presented
fairly, in all material respects, in accordance
with the applicable financial reporting
framework.
 Qualified opinion
• Expressed when the auditor concludes that an
unqualified opinion cannot be expressed but
that the effect of any disagreement with
management, or limitation on scope is not so
material and pervasive as to require an adverse
opinion or a disclaimer of opinion.
 Adverse Opinion
◦ Issued when the effect of a disagreement is so
material and pervasive to the financial
statements that the auditor concludes that a
qualification of the report is not adequate to
disclose the misleading or incomplete nature of
the FS.
 Disclaimer of Opinion
◦ Issued when the possible effect of a limitation
on scope is so material and pervasive to the FS
that the audit has not been able obtain
sufficient appropriate audit evidence or is not
independent, and accordingly is unable to
express an opinion on the FS
Effect of materiality
• Type of audit report
• Immaterial
Unqualified Unqualified - Modified

Material
•Emphasis on matter
•Going concern
Scope limitation: •Other auditor
Client imposed Not applicable FRF •Lack of consistency
Condition-imposed

Qualified Qualified

Pervasively
Material Disclaimer Adverse