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CA Inter Auditing and Ethics study materials
CA Inter Auditing and Ethics study resources

CA Inter Auditing and Ethics: Audit Report

CA Inter Auditing and Ethics · Work through your exam, one topic at a time.

All guide sections

Audit Report

Domain 8 tests whether you can build a report whose opinion, basis and statutory content all agree with the evidence.

The opinion (SA 700)

An unmodified opinion states that the financial statements give a true and fair view, or are prepared, in all material respects, in accordance with the framework. Elements include title, addressee, opinion section, basis for opinion, responsibilities of management and of the auditor, and signature with membership number, place and date.

Modification (SA 705)

Qualified ('except for') when the matter is material but not pervasive; adverse when the statements are materially and pervasively misstated; disclaimer when sufficient appropriate evidence cannot be obtained and the possible effects are material and pervasive. The basis paragraph must describe the matter and its effects.

KAM and other paragraphs (SA 701, SA 706)

Key audit matters are required for listed entities and are selected from matters communicated to those charged with governance. Emphasis of Matter points to a matter properly disclosed in the financial statements; Other Matter addresses something not presented there. Neither is a modification.

Section 143(3) and Rule 11

The report states whether accounts agree with the books, whether standards are followed, whether any fraud was reported, and gives Rule 11 disclosures on pending litigation, foreseeable losses on long-term contracts and transfers to the IEPF. CARO 2020 clauses are answered by exception.

Worked example

Inventory of 12 crore, being 40% of total assets, cannot be verified because records were destroyed and no alternative procedures exist. Reasoning: inability to obtain evidence, material and pervasive, leads to a disclaimer of opinion; a qualified opinion would understate the problem.

Traps

  • Describing an Emphasis of Matter paragraph as a qualification.
  • Using a KAM for a matter not presented in the financial statements.
  • Dating the report before the board approves the financial statements.
  • Omitting the basis paragraph when issuing a disclaimer.