A written report encompasses reports issued in hard copy format and those using an electronic medium.
Appendix 1 contains illustrations of auditors’ reports on a financial report, incorporating the elements set forth in paragraphs 21‑42.
Auditor’s Report for Audits Conducted in Accordance with Australian Auditing Standards
Title (Ref: Para. 21)
A title indicating the report is the report of an independent auditor, for example, “Independent Auditor’s Report,” affirms that the auditor has met all of the relevant ethical requirements regarding independence and, therefore, distinguishes the independent auditor’s report from reports issued by others.
Addressee (Ref: Para. 22)
Law or regulation often specifies to whom the auditor’s report is to be addressed in that particular jurisdiction. The auditor’s report is normally addressed to those for whom the report is prepared, often either to the shareholders or to those charged with governance of the entity whose financial report is being audited.
Introductory Paragraph (Ref: Para. 23)
The introductory paragraph states, for example, that the auditor has audited the accompanying financial report of the entity, which comprises [state the title of each financial statement comprising the financial report required by the applicable financial reporting framework, specifying the date or period covered by each financial statement] and the summary of significant accounting policies and other explanatory information.
When the auditor is aware that the audited financial report will be included in a document that contains other information, such as an annual report, the auditor may consider, if the form of presentation allows, identifying the page numbers on which the audited financial report is presented. This helps users to identify the financial report to which the auditor’s report relates.
The auditor’s opinion covers the financial report as defined by the applicable financial reporting framework. For example, in the case of many general purpose frameworks, the financial report includes: a statement of financial position, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, notes comprising a summary of significant accounting policies and other explanatory information, and an assertion by those responsible for the financial report. In some jurisdictions additional information might also be considered to be an integral part of the financial report.
Management’s Responsibility for the Financial Report (Ref: Para. 26)
ASA 200 explains the premise, relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit in accordance with Australian Auditing Standards is conducted. Management and, where appropriate, those charged with governance accept responsibility for the preparation of the financial report in accordance with the applicable financial reporting framework, including where relevant its fair presentation. Management also accepts responsibility for such internal control as it deems necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. The description of management’s responsibilities in the auditor’s report includes reference to both responsibilities as it helps to explain to users the premise on which an audit is conducted.
There may be circumstances when it is appropriate for the auditor to add to the description of management’s responsibility in paragraph 26 to reflect additional responsibilities that are relevant to the preparation of the financial report in the context of the particular jurisdiction or the nature of the entity.
Paragraph 26 is consistent with the form in which the responsibilities are agreed in the engagement letter or other suitable form of written agreement, as required by ASA 210.[16] ASA 210 provides some flexibility by explaining that, if law or regulation prescribes the responsibilities of management and, where appropriate, those charged with governance in relation to financial reporting, the auditor may determine that the law or regulation includes responsibilities that, in the auditor’s judgement, are equivalent in effect to those set out in ASA 210. For such responsibilities that are equivalent, the auditor may use the wording of the law or regulation to describe them in the engagement letter or other suitable form of written agreement. In such cases, this wording may also be used in the auditor’s report to describe management’s responsibilities as required by paragraph 26. In other circumstances, including where the auditor decides not to use the wording of law or regulation as incorporated in the engagement letter, the wording of paragraph 26 is used.
In some jurisdictions, law or regulation prescribing management’s responsibilities may specifically refer to a responsibility for the adequacy of accounting books and records, or accounting system. As books, records and systems are an integral part of internal control (as defined in ASA 315[17]), the descriptions in ASA 210 and in paragraph 26 do not make specific reference to them.
Auditor’s Responsibility (Ref: Para. 29‑30)
The auditor’s report states that the auditor’s responsibility is to express an opinion on the financial report based on the audit in order to contrast it to management’s responsibility for the preparation of the financial report.
The reference to the standards used conveys to the users of the auditor’s report that the audit has been conducted in accordance with established standards.
In accordance with ASA 200, the auditor does not represent compliance with the Australian Auditing Standards in the auditor’s report unless the auditor has complied with the requirements of ASA 200 and all other Australian Auditing Standards relevant to the audit.[18]
Auditor’s Opinion (Ref: Para. 35‑37)
Wording of the auditor’s opinion prescribed by law or regulation
ASA 210 explains that, in some cases, law or regulation of the relevant jurisdiction prescribes the wording of the auditor’s report (which in particular includes the auditor’s opinion) in terms that are significantly different from the requirements of the Australian Auditing Standards. In these circumstances, ASA 210 requires the auditor to evaluate:
Whether users might misunderstand the assurance obtained from the audit of the financial report and, if so,
Whether additional explanation in the auditor’s report can mitigate possible misunderstanding.
If the auditor concludes that additional explanation in the auditor’s report cannot mitigate possible misunderstanding, ASA 210 requires the auditor not to accept the audit engagement, unless required by law or regulation to do so. In accordance with ASA 210, an audit conducted in accordance with such law or regulation does not comply with the Australian Auditing Standards. Accordingly, the auditor does not include any reference in the auditor’s report to the audit having been conducted in accordance with Australian Auditing Standards.[19]
“Presents fairly, in all material respects” or “gives a true and fair view”
Whether the phrase “presents fairly, in all material respects,” or the phrase “gives a true and fair view” is used in any particular jurisdiction is determined by the law or regulation governing the audit of a financial report in that jurisdiction, or by generally accepted practice in that jurisdiction. Where law or regulation requires the use of different wording, this does not affect the requirement in paragraph 14 of this Auditing Standard for the auditor to evaluate the fair presentation of the financial report prepared in accordance with a fair presentation framework.
Description of information that the financial report presents
In the case of a financial report prepared in accordance with a fair presentation framework, the auditor’s opinion states that the financial report presents fairly, in all material respects, or gives a true and fair view of the information that the financial report is designed to present, for example, in the case of many general purpose frameworks, the financial position of the entity as at the end of the period and the entity’s financial performance and cash flows for the period then ended.
Description of the applicable financial reporting framework and how it may affect the auditor’s opinion
The identification of the applicable financial reporting framework in the auditor’s opinion is intended to advise users of the auditor’s report of the context in which the auditor’s opinion is expressed; it is not intended to limit the evaluation required in paragraph 14. The applicable financial reporting framework is identified in such terms as:
“… in accordance with Australian Accounting Standards” or
“… in accordance with accounting principles generally accepted in Jurisdiction X …”
When the applicable financial reporting framework encompasses financial reporting standards and legal or regulatory requirements, the framework is identified in such terms as “… in accordance with Australian Accounting Standards, the requirements of the Corporations Act 2001 and the Corporations Regulations 2001.” ASA 210 deals with circumstances where there are conflicts between the financial reporting standards and the legislative or regulatory requirements.[20]
As indicated in paragraph A8, the financial report may be prepared in accordance with two financial reporting frameworks, which are therefore both applicable financial reporting frameworks. Accordingly, each framework is considered separately when forming the auditor’s opinion on the financial report, and the auditor’s opinion in accordance with paragraphs 35‑36 refers to both frameworks as follows:
If the financial report complies with each of the frameworks individually, two opinions are expressed: that is, that the financial report is prepared in accordance with one of the applicable financial reporting frameworks (for example, Australian Accounting Standards) and an opinion that the financial report is prepared in accordance with the other applicable financial reporting framework (for example, International Financial Reporting Standards). These opinions may be expressed separately or in a single sentence (for example, the financial report is presented fairly, in all material respects, in accordance with Australian Accounting Standards and with International Financial Reporting Standards).
If the financial report complies with one of the frameworks but fails to comply with the other framework, an unmodified opinion can be given that the financial report is prepared in accordance with the one framework (for example, Australian Accounting Standards) but a modified opinion given with regard to the other framework (for example, International Financial Reporting Standards) in accordance with ASA 705.
As indicated in paragraph A10, the financial report may represent compliance with the applicable financial reporting framework and, in addition, disclose the extent of compliance with another financial reporting framework. As explained in paragraph A46, such supplementary information is covered by the auditor’s opinion as it cannot be clearly differentiated from the financial report.
If the disclosure as to the compliance with the other framework is misleading, a modified opinion is expressed in accordance with ASA 705.
If the disclosure is not misleading, but the auditor judges it to be of such importance that it is fundamental to the users’ understanding of the financial report, an Emphasis of Matter paragraph is added in accordance with ASA 706, drawing attention to the disclosure.
Aus A33.1 With respect to the requirement in paragraph Aus 37.1, Appendix 1 provides illustrations of auditors’ reports, see:
[Aus] Illustration 1A: Example Auditor’s Report Single Company—Corporations Act 2001; and
Aus A33.2 ASA 705 provides requirements and guidance when the auditor disagrees with those charged with governance in relation to compliance with the requirements of Australian Accounting Standards, and this applies to, and includes, AASB 101 requirements. (Ref: Para. Aus 37.1)
Other Reporting Responsibilities (Ref: Para. 38‑39)
In some jurisdictions, the auditor may have additional responsibilities to report on other matters that are supplementary to the auditor’s responsibility under the Australian Auditing Standards to report on the financial report. For example, the auditor may be asked to report certain matters if they come to the auditor’s attention during the course of the audit of the financial report. Alternatively, the auditor may be asked to perform and report on additional specified procedures, or to express an opinion on specific matters, such as the adequacy of accounting books and records. Auditing standards in the specific jurisdiction often provide guidance on the auditor’s responsibilities with respect to specific additional reporting responsibilities in that jurisdiction.
Aus A34.1 When the audit of a financial report is conducted in accordance with the Corporations Act 2001 (the “Act”), section 308(3)(b) of that Act requires the auditor to describe in the auditor’s report any deficiency, failure or shortcoming in respect of certain matters referred to in section 307(b), (c) or (d) of that Act.
In some cases, the relevant law or regulation may require or permit the auditor to report on these other responsibilities within the auditor’s report on the financial report. In other cases, the auditor may be required or permitted to report on them in a separate report.
These other reporting responsibilities are addressed in a separate section of the auditor’s report in order to clearly distinguish them from the auditor’s responsibility under the Australian Auditing Standards to report on the financial report. Where relevant, this section may contain a sub‑heading(s) that describe(s) the content of the other reporting responsibility paragraph(s).
Aus A36.1 An example of “other reporting responsibilities” is where a remuneration report is included in a directors’ report and the auditor is required to report in accordance with section 308(3C) of the Corporations Act 2001.
Signature of the Auditor (Ref: Para. 40)
The auditor’s signature is either in the name of the audit firm, the personal name of the auditor or both, as appropriate for the particular jurisdiction. In addition to the auditor’s signature, in certain jurisdictions, the auditor may be required to declare in the auditor’s report the auditor’s professional accountancy designation or the fact that the auditor or firm, as appropriate, has been recognised by the appropriate licensing authority in that jurisdiction.
Aus A37.1 Under the Corporations Act 2001, the auditor of a company or registered scheme is required to sign the auditor’s report in both their own name and the name of their firm [section 324AB(3)] or the name of the audit company [section 324AD(1)], as applicable.
Date of the Auditor’s Report (Ref: Para. Aus 40.1 and 41)
The date of the auditor’s report informs the user of the auditor’s report that the auditor has considered the effect of events and transactions of which the auditor became aware and that occurred up to that date. The auditor’s responsibility for events and transactions after the date of the auditor’s report is addressed in ASA 560.[21]
Since the auditor’s opinion is provided on the financial report and the financial report is the responsibility of management, the auditor is not in a position to conclude that sufficient appropriate audit evidence has been obtained until evidence is obtained that all the statements that comprise the financial report, including the related notes, have been prepared and management has accepted responsibility for them.
In some jurisdictions, the law or regulation identifies the individuals or bodies (for example, the directors) that are responsible for concluding that all the statements that comprise the financial report, including the related notes, have been prepared, and specifies the necessary approval process. In such cases, evidence is obtained of that approval before dating the report on the financial report. In other jurisdictions, however, the approval process is not prescribed in law or regulation. In such cases, the procedures the entity follows in preparing and finalising its financial report in view of its management and governance structures are considered in order to identify the individuals or body with the authority to conclude that all the statements that comprise the financial report, including the related notes, have been prepared. In some cases, law or regulation identifies the point in the financial reporting process at which the audit is expected to be complete.
In some jurisdictions, final approval of the financial report by shareholders is required before the financial report is issued publicly. In these jurisdictions, final approval by shareholders is not necessary for the auditor to conclude that sufficient appropriate audit evidence has been obtained. The date of approval of the financial report for purposes of the Australian Auditing Standards is the earlier date on which those with the recognised authority determine that all the statements that comprise the financial report, including the related notes, have been prepared and that those with the recognised authority have asserted that they have taken responsibility for them.
Auditor’s Report Prescribed by Law or Regulation (Ref: Para. 43)
ASA 200 explains that the auditor may be required to comply with legal or regulatory requirements in addition to Australian Auditing Standards.[22] Where this is the case, the auditor may be obliged to use a layout or wording in the auditor’s report that differs from that described in this Auditing Standard. As explained in paragraph 4, consistency in the auditor’s report, when the audit has been conducted in accordance with the Australian Auditing Standards, which use the ISAs as the underlying auditing standards, promotes credibility in the global marketplace by making more readily identifiable those audits that have been conducted in accordance with globally recognised standards. When the differences between the legal or regulatory requirements and the Australian Auditing Standards relate only to the layout and wording of the auditor’s report and, at a minimum, each of the elements identified in paragraph 43(a)‑(i) are included in the auditor’s report, the auditor’s report may refer to Australian Auditing Standards. Accordingly, in such circumstances the auditor is considered to have complied with the requirements of the Australian Auditing Standards, even when the layout and wording used in the auditor’s report are specified by legal or regulatory reporting requirements. Where specific requirements in a particular jurisdiction do not conflict with Australian Auditing Standards, adoption of the layout and wording used in this Auditing Standard assists users of the auditor’s report more readily to recognise the auditor’s report as a report on an audit conducted in accordance with the Australian Auditing Standards. ASA 210 deals with circumstances where law or regulation prescribes the layout or wording of the auditor’s report in terms that are significantly different from the requirements of Australian Auditing Standards.
Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction and Australian Auditing Standards (Ref: Para. 44)
The auditor may refer in the auditor’s report to the audit having been conducted in accordance with both Australian Auditing Standards as well as other auditing standards when, in addition to complying with the relevant other auditing standards, the auditor complies with each of the Australian Auditing Standards relevant to the audit.[23]
A reference to both Australian Auditing Standards and other auditing standards is not appropriate if there is a conflict between the requirements in the Australian Auditing Standards and those in the other auditing standards that would lead the auditor to form a different opinion or not to include an Emphasis of Matter paragraph that, in the particular circumstances, is required by the Australian Auditing Standards. For example, some other auditing standards prohibit the auditor from including an Emphasis of Matter paragraph to highlight a going concern problem, whereas ASA 570 requires the auditor to add an Emphasis of Matter paragraph in such circumstances.[24] In such a case, the auditor’s report refers only to the auditing standards (either Australian Auditing Standards or the other auditing standards) in accordance with which the auditor’s report has been prepared.