Circumstances that may Result in Other tCircumstances that may Result in Other than an Unqualified Opinion

Circumstances that may Result in Other than an Unqualified Opinion

Limitation on Scope

29 A limitation on the scope of the auditor’s work may sometimes be imposed by the entity (for example, when the terms of the engagement specify that the auditor will not carry out an audit procedure that the auditor believes is necessary). However, when the limitation in the terms of a proposed engagement is such that the auditor believes the need to express a disclaimer of opinion exists, the auditor would ordinarily not accept such a limited engagement as an audit engagement, unless required by statute. Also, a statutory auditor would not ordinarily accept such an audit engagement when the limitation infringes on the auditor’s statutory duties.

30 A scope limitation may be imposed by circumstances (for example, when the timing of the auditor’s appointment is such that the auditor is unable to observe the counting of physical inventories). It may also arise when, in the opinion of the auditor, the entity’s accounting records are inadequate or when the auditor is unable to carry out an audit procedure believed to be desirable. In these circumstances, under ASA 330 The Auditor’s Procedures in Response to Assessed Risks, the auditor needs to carry out reasonable alternative audit procedures in an attempt to obtain sufficient appropriate audit evidence to support an unqualified opinion.

31 When there is a limitation on the scope of the auditor’s work that requires expression of a qualified opinion or a disclaimer of opinion, the auditor’s report shall describe the limitation and indicate the possible adjustments to the financial report that might have been determined to be necessary had the limitation not existed.

Disagreement with those Charged with Governance

32 The auditor may disagree with those charged with governance about matters such as the acceptability of accounting policies selected, the method of their application, or the adequacy of disclosures in the financial report.

33 If disagreements between the auditor and those charged with governance about the acceptability, selection, application or adequacy of disclosures in the financial report are material to the financial report, the auditor shall express a qualified or an adverse opinion.

34 When the financial report has been prepared in accordance with Australian Accounting Standards but additional disclosures have been made in the financial report on the basis that, or which imply that, application of a particular Accounting Standard has resulted in the financial report being potentially misleading, a qualified opinion shall be expressed in relation to the additional disclosures, unless the auditor is of the opinion that:

(a) it is likely, in the absence of the additional disclosures, that users would be misled when making evaluations or decisions about the allocation of scarce resources; and