ACCA AAA ^INT Syllabus E. Completion, Review and Reporting - Audit Opinion - Notes ^{2 / 5}

If the auditor disagrees with some aspect of the financial statements or is unable to state that they provide a true and fair view, then a modified audit report will be issued

There are two types of modified audit report:

1. An unqualified audit report with extra paragraphs

2. A qualified audit report

Qualified Reports

There are two reasons that an auditor may qualify an audit report:

1. Disagreement

2. Insufficient Evidence

Disagreement

A qualified report for the reason of disagreement will be issued if the auditor disagrees with the application of accounting policies, the policies used, treatment of a particular item or the adequacy of disclosures

• The disagreement can be either:

  Material or

  Material & Pervasive

• A material disagreement - "Except for" Paragraph

  • This will mean that the auditor agrees with the rest of the financial statements, but disagrees with that particular element of them.

  • “Except for” paragraph

    In this situation the auditor will qualify the audit with an ‘except for’ paragraph i.e. In our opinion, except for the effect on the financial statements of the matter referred to in the preceding paragraph, the financial statements give a true and fair view,

• Material and Pervasive - Adverse Opinion

  • A disagreement which is material and pervasive is of such significance that the financial statements do not give a true and fair view.

  • Adverse opinion

    In such a situation an adverse opinion is issued i.e. the financial statements do not give a true and fair view.

Insufficient Evidence

If the auditor is unable to form an opinion, then the report will be qualified for Insufficient Evidence

Insufficient Evidence will be due to being unable to obtain sufficient evidence which should have been available.

• The insufficient evidence can be either:

  Material or

  Material & Pervasive

• Material - "Except for" paragraph

  • A material insufficient evidence will mean that the auditor agrees with the rest of the financial statements, but is unable to agree with that particular element of them

  • “Except for” Paragraph

    In this situation the auditor will qualify the audit with an ‘except for’ paragraph i.e. In our opinion, except for the matter referred to in the preceding paragraph, the financial statements give a true and fair view

• Material & Pervasive - Disclaimer of opinion

  • Insufficient evidence which is material and pervasive is of such significance that auditor is unable to state whether the financial statements give a true and fair view

  • Disclaimer of Opinion

    In such a situation a disclaimer of opinion is issued i.e. the auditors do not express an opinion on the financial statements