Page 145 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Communication in the auditor’s Emphasis of Matter paragraphs
report may prompt further aren't a replacement for individual
engagement with management and key audit matters where SA 701 is
those in governance regarding the applicable.
entity, audited financial statements,
or the audit performed. Widespread use may decrease the
effectiveness of the auditor’s
The auditor may list a matter more communication.
prominently by listing it first or
adding extra description to
highlight its importance.

(CNO - SA 706.120) Distinction Between Notes on Accounts and Qualifications
1. Management-Auditor Disagreement:
- Management usually clarifies disagreements with auditors in financial statement notes.
- Auditor registers disagreements via qualifications in their report.
2. Notes used to Protect from Modification:
- Both client and auditor function as distinct, independent entities.
- Management might request the auditor not to modify opinions if disclosures are made.
- "Emphasis of Matter" is not a replacement for opinion modification.
- Emphasis is used for correctly presented matters with adequate audit evidence.
3. Description of Modification: (Includes notes to A/c)
- If a report modification is needed, the auditor can reference management's note.
- Auditors should clarify their assessment, potential impact, and quantification.
- Auditors should clearly state the nature of qualifications.
- Reasons must be provided for negative or qualified answers.
- All qualifications must be present in the auditor’s report.

4. Qualification in Notes to Accounts:
- If qualificator notes are in accounts, auditors must independently state them in reports.
- Referring to notes in the audit report isn't automatically a qualification.
- Reports should represent the auditor's perspective, not management's.
5. Legal Breaches:
- Auditors should inform shareholders of company irregularities breaching the law.
- Opinions should be clear, avoiding ambiguous phrases.

(CNO - SA 706.140) Distinction Between Audit Report and Certificate
Term ‘Report’ & ‘Certificate’ Usage: The term ‘report’ is used where an expression of opinion is involved. The
term ‘certificate’ is preferable where the auditor comments on or verifies facts such as a verification of investment
by inspection or the checking of ballot papers on a poll in a company meeting.
Example of certificate: Under the Companies Act, 2013, a number of situations are there where an auditor is
required to issue a certificate rather than a report, like under Section 66 of the Companies Act, 2013, an auditor
is required to file a certificate in the tribunal where company is proposing for the reduction of capital.
Example of Report: However, the report under Section 143 of the Companies Act, 2013, is an opinion-based
report and is not a certificate.

www.auditguru.in 07.19