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Interpretation and Application of International Standards on Auditing by Steven Collings

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33

ISA 705 (REVISED AND REDRAFTED) MODIFICATIONS TO THE OPINION IN THE INDEPENDENT AUDITOR’S REPORT

Modifications to the opinion in the independent auditor’s report include:

  • Qualified opinion.
  • Adverse opinion.
  • Disclaimer of opinion.

ISA 705 (revised and redrafted) deals with the auditor’s responsibilities when they conclude that a modification to their opinion is required. Professional judgement is often used on the part of the auditor, particularly in circumstances such as a limitation on the scope of the audit work, because it is often difficult to judge the overall effect such a scope limitation may have on the financial statements as a whole.

ISA 705 requires that where the auditor concludes that, based on the audit evidence in their possession, the financial statements are not free from material misstatement, or where the auditor is unable to obtain sufficient appropriate audit evidence, the opinion expressed by the auditor is to be modified [ISA705.4].

One source of uncertainty is limitation in the scope of an audit. A scope limitation will arise where the auditor is unable, for any reason, to obtain all the information and explanations which are considered necessary for the purpose of the audit, arising from:

  • Absence of proper accounting records.
  • An inability to carry out audit procedures considered necessary as, for example, where the auditor is unable to obtain satisfactory evidence concerning the existence or ownership of material assets.

When giving this type of ...

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