Page 142 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Material but not pervasive Material and pervasive

Financial Statements are
materially misstated Qualified Opinion Adverse Opinion

Inability to obtain
Sufficient appropriate Qualified Opinion Disclaimer of Opinion
audit evidence

(CNO - SA 705.200) Communication with Those Charged with Governance
Circumstances & wordings: When an auditor anticipates a modification in the auditor's report, they are
obligated to communicate with those charged with governance, detailing the circumstances leading to the
modification, the proposed wording, and engaging in discussions about the audit findings and identified
misstatements.

SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in The

Independent Auditor’s Report”

(CNO - SA 706.020) Objective & Definition.
1. Draw users’ attention: The objective of the auditor, having formed an opinion on the financial statements,
is to draw users’ attention, when in the auditor’s judgment it is necessary to do so, by way of clear additional
communication in the auditor’s report, to:
1A. Understanding of the financial statements: A matter, although appropriately presented or disclosed in the
financial statements, that is of such importance that it is fundamental to users’ understanding of the financial
statements; or
1B. Understanding of audit, auditor’s responsibilities or auditor’s report: As appropriate, any other matter
that is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.

2A. Emphasis of Matter Paragraph: A paragraph included in the auditor’s report that refers to a matter
appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such
importance that it is fundamental to users’ understanding of the financial statements.
2B. Other Matter Paragraph: A paragraph included in the auditor’s report that refers to a matter other than
those presented or disclosed in the financial statements that, in the auditor’s judgment, is relevant to users’
understanding of the audit, the auditor’s responsibilities or the auditor’s report.

(CNO - SA 706.040) I. When to give emphasis of Matter Paragraphs in the Auditor’s Report?
1. Criteria for Emphasis of Matter Paragraph: If the auditor considers it necessary to draw users’ attention to
a matter presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance
that it is fundamental to users’ understanding of the financial statements, the auditor shall include an Emphasis
of Matter paragraph in the auditor’s report provided

2.Restrictions:
2A. No Modifications: The auditor would not be required to modify the opinion in accordance with SA 705
(Revised) as a result of the matter; and
2B. No KAM: When SA 701 applies, the matter has not been determined to be a key audit matter to be
communicated in the auditor’s report.

II. Examples:

www.auditguru.in 07.16