Nature of circumstances Material So Material, Pervasive,

Fundamental

1 Clean Unqualified Report

2 Going Concern Problem Matter of Emphasize Disclaimer of opinion

3 Uncertainty

4 Scope Limitation Qualified Disclaimer of opinion

Except for

5 Disagreement Qualified Adverse opinion

Except for

6 Non- Compliance of Govt. Rules, Qualified Adverse

Regulations Except for

7 Significant Risk Assessed which can Qualified Disclaimer

not be mitigated with substantive test Except for
only

8 Suspected Fraud & Error, but Qualified Disclaimer

Management would not allow to do the Except for
examination
Reasons for qualification

As indicated earlier, circumstances which give rise to a qualification of

opinion in an audit report may be in the nature of scope limitation,
uncertainty or disagreement.

Difference between ‘scope limitation’ and ‘disagreement’

In case of scope limitation the subject matter is uncertain, neither the

auditor nor the auditee is aware of the final out come. But in case of
disagreement, the subject matter is certain (a fact) Both the auditor and
the auditee know the out come of the matter; yet the management is not
agreeable to amend the account for the facts.
Circumstances giving rise to Limitation of scope include
the following:
a. Limitations in the scope of the audit. Scope
limitations arise if the auditor is unable for any reason to
obtain all the information and explanations which he
considers necessary for the purpose of his audit; for
example,
1) inability to carry out an audit procedure considered
necessary, or
2) the absence of proper accounting records.
3) unable to conclude whether FSs are materially
misstated due to Fraud & Error.
4) auditor was unable to obtain sufficient appropriate
audit evidence in support of risk assessment, control test
and/ substantive test.
2. Circumstances giving rise to disagreement include the
following:

a. Departures from acceptable accounting practices where:

i. there has been failure to comply with the Bangladesh Accounting
Standards (BAS) and the auditor does not concur,
ii. an accounting policy not the subject of a BAS is adopted which
in the opinion of the auditor is not appropriate to the
circumstances of the business; or
iii. exceptionally, a BAS has been followed with the result that the
financial statements do not present a true and fair view;
a. disagreement as to the facts or amounts included in the
financial statements;
b. disagreement as to the manner or extent of disclosure of facts
or amounts in the financial statements;
c. failure to comply with relevant legislation or other
requirements.
Whenever the auditor expresses an
opinion that is other than unqualified, a
clear description of all the substantive
reasons should be included in the report
and, unless impracticable, a
qualification of the possible effect(s) on
the financial statements
 Areas Audit Report Letter of Weakness Notes to the FSs

Responsib Auditor Auditor Management

ility/
Prepared
by

Objective To express an opinion Facts, findings and Notes are the

s/ on the true and fairness recommendations on the accountant's means of
Purpose of the FSs Internal Control amplifying or explaining
• Systems and the items presented in
Procedures the main body of the
• Accounting Principles statements.
& Legal Requirements Information pertinent
to specific financial
statement items can be
explained in qualitative
terms

User Owner, shareholder, Management Owner, shareholder,

members, partners, members, partners,
lender, investor, lender, investor,
management management

FAMCFAMC
&DWA
Contents Opinion, comments Recommendation, Facts, amounts,
comments, facts information
All the work of an audit is directed towards the final
objective – the report to the members of a company
client or to the owner(s) of an unregistered one.
In addition to these reports, however, the auditor also
reports to the management in a management letter –
offering constructive criticism of the client’s control
system.
We therefore have three areas to deal with:
---the unqualified audit report;
---qualifications in audit reports;
---the management letter (also known as letter of
weakness or letter of comment).
THE END