Page 239 - CA Inter Audit PARAM

CA Ravi Taori

QNO Objectives of Standards Old Course – (SM17/ SM20/SM21)
705.01 Bhaskar CNO - SA705.020 New Course – (SM25/M24M)
Discuss the objective of the auditor as per Standard on Auditing (SA) 705 Modifications to The Opinion in

The Independent Auditor’s Report.
Answer ➢ As per Standard on Auditing (SA) 705 “Modifications to The Opinion in The Independent Auditor’s
Report”, the objective of the auditor is to express clearly an appropriately modified opinion on the
financial statements that is necessary when:
The auditor concludes, based on the audit evidence obtained, that the financial statements
as a whole are not free from material misstatement; or
The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the
financial statements as a whole are free from material misstatement.

QNO Types of Modification Old Course – (SM17/ SM20/SM21/M23E)
705.03 Bhaskar CNO - SA705.020 New Course – (SM25)
Elucidate the circumstances when a modification to the Auditor’s opinion is required. Also state the
factors for making the decision regarding which type of modified opinion is appropriate.
Or
Discuss the factors affecting the decision of the auditor regarding which type of modified opinion is
appropriate.
Answer Circumstances When a Modification to the Auditor’s Opinion Is Required
The auditor shall modify the opinion in the auditor’s report in the following circumstances:
1. The auditor concludes that, based on the audit evidence obtained, the financial statements as a
whole are not free from material misstatement; or

2. The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial
statements as a whole are free from material misstatement.

The decision regarding which type of modified opinion is appropriate depends upon:
(a) The nature of the matter giving rise to the modification, that is, whether the financial statements
are materially misstated or, in the case of an inability to obtain sufficient appropriate audit
evidence, may be materially misstated; and

(b) The auditor’s judgement about the pervasiveness of the effects or possible effects of the matter on
the financial statements.

QNO Modification to opinion Old Course — (N17R/M17M)
705.05 Bhaskar CNO - SA705.020
A modification of opinion
Answer ➢ Modification of Opinion:
The auditor shall modify the opinion in the auditor’s report when-
The auditor concludes that, based on the audit evidence obtained, the financial statements
as a whole are not free from material misstatement; or
The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the
financial statements as a whole are free from material misstatement

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