Isa 700 Audit Opinion

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ISA 700, FORMING AN OPINIONAND REPORTING ON

FINANCIAL STATEMENTS


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Introduction

Scope of this ISA

This International Standard on Auditing (ISA) dealswith the auditors responsibility to form an opinion

on the financial statements. It also deals with theform and content of the auditors report issued as aresult of an audit of financial statements.

ISA 705 and ISA 706 deal with how the form andcontent of the auditors report are affected when theauditor expresses a modified opinion or includes anEmphasis of Matter paragraph or an Other Matterparagraph in the auditorsreport.


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Objectives

The objectives of the auditor are:

(a) To form an opinion on the financial statementsbased on an evaluation of the conclusions drawnfrom the audit evidence obtained; and

(b) To express clearly that opinion through a writtenreport that also describes the basis for that opinion.

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Definitions

(a) General purpose financial statementsFinancialstatements prepared in accordance with a generalpurpose framework.

(b) General purpose frameworkA financial reporting

framework designed to meet the common financialinformation needs of a wide range of users. Thefinancial reporting framework may be a fair presentationframework or a compliance framework.

The term fair presentation framework is used to refer to afinancial reporting framework that requires compliancewith the requirements of the framework and:

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Definitions

(i) Acknowledges explicitly or implicitly that, to achieve fairpresentation of the financial statements, it may benecessary for management to provide disclosuresbeyond those specifically required by the framework; or

(ii) Acknowledges explicitly that it may be necessary formanagement to depart from a requirement of theframework to achieve fair presentation of the financialstatements. Such departures are expected to benecessary only in extremely rare circumstances.

The term compliance framework is used to refer to afinancial reporting framework that requires compliancewith the requirements of the framework, but does notcontain the acknowledgements in (i) or (ii) above.

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Definitions

(c) Unmodified opinionThe opinion expressed by theauditor when the auditor concludes that the financialstatements are prepared, in all material respects, inaccordance with the applicable financial reporting

framework.

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Forming an Opinion on the Financial

Statements

The auditor shall form an opinion on whether the financialstatements are prepared, in all material respects, inaccordance with the applicable financial reportingframework.

In order to form that opinion, the auditor shall conclude asto whether the auditor has obtained reasonableassurance about whether the financial statements as awhole are free from material misstatement, whether dueto fraud or error. That conclusion shall take into

account:

(a) The auditors conclusion, in accordance with ISA 330,whether sufficient appropriate audit evidence has beenobtained;

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Statements

(b) The auditors conclusion, in accordance with ISA 450,whether uncorrected misstatements are material,individually or in aggregate; and

(c) The evaluations required by the following paragraphs

The auditor shall evaluate whether the financial statementsare prepared, in all material respects, in accordance withthe requirements of the applicable financial reportingframework. This evaluation shall include consideration of

the qualitative aspects of the entitys accounting practices,including indicators of possible bias in managementsjudgments.

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Statements

In particular, the auditor shall evaluate whether, in view ofthe requirements of the applicable financial reportingframework:

(a) The financial statements adequately disclose the

significant accounting policies selected and applied;

(b) The accounting policies selected and applied areconsistent with the applicable financial reportingframework and are appropriate;

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Statements

(c) The accounting estimates made by management arereasonable;

(d) The information presented in the financial statements isrelevant, reliable, comparable, and understandable;

(e) The financial statements provide adequate disclosuresto enable the intended users to understand the effect ofmaterial transactions and events on the informationconveyed in the financial statements; and

(f) The terminology used in the financial statements,including the title of each financial statement, isappropriate.

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Statements

When the financial statements are prepared in accordancewith a fair presentation framework, the evaluationrequired by the aforementioned paragraphs shall alsoinclude whether the financial statements achieve fairpresentation. The auditors evaluation as to whether thefinancial statements achieve fair presentation shallinclude consideration of:

(a) The overall presentation, structure and content of thefinancial statements; and

(b) Whether the financial statements, including the relatednotes, represent the underlying transactions and eventsin a manner that achieves fair presentation.

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Form of Opinion

The auditor shall express an unmodified opinion when theauditor concludes that the financial statements are prepared,in all material respects, in accordance with the applicablefinancial reporting framework.

If the auditor:(a) concludes that, based on the audit evidence obtained, the

financial statements as a whole are not free from materialmisstatement; or

(b) is unable to obtain sufficient appropriate audit evidence toconclude that the financial statements as a whole are freefrom material misstatement,

the auditor shall modify the opinion in the auditors reportin accordance with ISA 705.

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AuditorsReport

The auditors report shall be in writing.

Auditors Report for Audits Conducted in Accordance withInternat ional Standards on Aud it ing

Title

The auditors report shall have a title that clearly indicatesthat it is the report of an independent auditor.

Addressee

The auditors report shall be addressed as required by the

circumstances of the engagement. 13


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AuditorsReport

Introductory Paragraph

The introductory paragraph in the auditors report shall:

(a) Identify the entity whose financial statements have beenaudited;

(b) State that the financial statements have been audited;

(c) Identify the title of each statement that comprises thefinancial statements;

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AuditorsReport

(d) Refer to the summary of significant accounting policiesand other explanatory information; and

(e) Specify the date or period covered by each financial

statementcomprising the financial statements.

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AuditorsReport

Managements Responsibility for the Financial Statements

This section of the auditors report describes theresponsibilities of those in the organization that areresponsible for the preparation of the financial statements.

The auditors report need not refer specifically tomanagement, but shall use the term that is appropriate inthe context of the legal framework in the particularjurisdiction. In some jurisdictions, the appropriatereference may be to those charged with governance.

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AuditorsReport

AuditorsResponsibilityThe auditors report shall include a section with theheading Auditors Responsibility.

The auditors report shall state that the responsibility of the

auditor is to express an opinion on the financial statementsbased on the audit.

The auditors report shall state that the audit wasconducted in accordance with International Standards onAuditing. The auditors report shall also explain that thosestandards require that the auditor comply with ethicalrequirements and that the auditor plan and perform theaudit to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.

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AuditorsReport

The auditors report shall describe an audit by stating that:

(a) An audit involves performing procedures to obtain auditevidence about the amounts and disclosures in thefinancial statements;

(b) The procedures selected depend on the auditorsjudgment, including the assessment of the risks ofmaterial misstatement of the financial statements,whether due to fraud or error. In making those risk

assessments, the auditor considers internal controlrelevant to the entitys preparation of the financialstatements in order to design audit procedures that areappropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness

of the entitys internal control. 18


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AuditorsReport

In circumstances when the auditor also has aresponsibility to express an opinion on theeffectiveness of internal control in conjunction with theaudit of the financial statements, the auditor shall omit

the phrase that the auditors consideration of internalcontrol is not for the purpose of expressing an opinionon the effectiveness of internal control; and

(c) An audit also includes evaluating the appropriateness

of the accounting policies used and the reasonablenessof accounting estimates made by management,

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AuditorsReport

AuditorsOpinionThe auditors report shall include a section with the heading

Opinion.

When expressing an unmodified opinion on financial statements

prepared in accordance with a fair presentation framework,the auditors opinion shall, unless otherwise required by lawor regulation, use one of the following phrases, which areregarded as being equivalent:

(a) The financial statements present fairly, in all materialrespects, in accordance with [the applicable financialreporting framework]; or

(b) The financial statements give a true and fair view of inaccordance with [the applicable financial reporting

framework]. 20


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AuditorsReport

Other Reporting Responsibilities

If the auditor addresses other reporting responsibilities inthe auditors report on the financial statements that are inaddition to the auditors responsibility under the ISAs to

report on the financial statements, these other reportingresponsibilities shall be addressed in a separate section inthe auditors report that shall be sub-titled Report on OtherLegal and Regulatory Requirements, or otherwise asappropriate to the content of the section.

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AuditorsReport

Signature of the Auditor

The auditors report shall be signed.

Date of the Auditors Report

The auditors report shall be dated no earlier than the date onwhich the auditor has obtained sufficient appropriate auditevidence on which to base the auditors opinion on the financialstatements, including evidence that:

(a) All the statements that comprise the financial statements,including the related notes, have been prepared; and

(b) Those with the recognized authority have asserted that they

have taken responsibility for those financial statements. 22


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AuditorsReport

AuditorsAddress

The auditors report shall name the location in the jurisdictionwhere the auditor practices.

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Supplementary Information Presented with

the Financial Statements

If supplementary information that is not required by theapplicable financial reporting framework is presented withthe audited financial statements, the auditor shall evaluatewhether such supplementary information is clearlydifferentiated from the audited financial statements. If suchsupplementary information is not clearly differentiated fromthe audited financial statements, the auditor shall askmanagement to change how the unaudited supplementaryinformation is presented. If management refuses to do so,the auditor shall explain in the auditors report that suchsupplementary information has not been audited.

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Supplementary Information Presented with

the Financial Statements

Supplementary information that is not required by theapplicable financial reporting framework but isnevertheless an integral part of the financial statementsbecause it cannot be clearly differentiated from the auditedfinancial statements due to its nature and how it ispresented shall be covered by the auditorsopinion.

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Illustration of Auditors Reports on Financial

Statements

Circumstances include the following:

Audit of a complete set of financial statements.

The financial statements are prepared for a general purpose

bymanagement of the entity in accordance with InternationalFinancial

Reporting Standards.

The terms of the audit engagement reflect the description of

managements responsibility for the financial statements inISA 210.

In addition to the audit of the financial statements, the auditorhas other reporting responsibilities required under local law.

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Statements

INDEPENDENT AUDITORS REPORT

[Appropriate Addressee]

Report on the Financial Statements

We have audited the accompanying financial statements of ABCCompany, which comprise the statement of financial position asat December 31, 20X1, and the statement of comprehensiveincome, statement of changes in equity and statement of cashflows for the year then ended, and a summary of significantaccounting policies and other explanatory information.

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Statements

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fairpresentation of these financial statements in accordance withInternational Financial Reporting Standards,3 and for suchinternal control as management determines is necessary to

enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

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Statements

AuditorsRespons ib i l ity

Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from materialmisstatement.

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Statements

An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements.The procedures selected depend on the auditors judgment,including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control

relevant to the entitys preparation and fair presentation4 of thefinancial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entitys internalcontrol. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion.

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Statements

Opin ion

In our opinion, the financial statements present fairly, in allmaterial respects, (or giv e a true and fair view of) the financialpos i t ion o f ABC Company as at December 31, 20X1, and (of) i tsf inancial performance and its cash f lows for the year then ended

in accordance with International Financial Reporting Standards.

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Statements

Report on Other Legal and Regulatory Requirements

[Form and content of this section of the auditors report will varydepending on the nature of the auditors other reportingresponsibilities.]

[Auditorssignature]

[Date of the auditors report]

[Auditorsaddress]

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KPMG Mexico

Office:

e-mail:

kpmg.com.mx

www.kpmg.com.mx

La informacin aqu contenida es de naturaleza general y no tiene el propsito de abordar las circunstancias de ningn individuo o entidad

en particular. Aunque procuramos proveer informacin correcta y oportuna, no puede haber garanta de que dicha informacin sea

correcta en la fecha que se reciba o que continuar siendo correcta en el futuro. Nadie debe tomar medidas basado en dicha informacin

sin la debida asesora profesional despus de un estudio detallado de la situacin en particular.

"D.R." 2010 KPMG Crdenas Dosal , S.C. la firma Mexicana miembro de KPMG International Cooperative (KPMG International), una entidad suiza.Blvd. Manuel vila Camacho No. 176, Mxico, 11650, D.F. Impreso en Mxico. KPMG y el logotipo de KPMG son marcas registradas de KPMG InternationalCooperative (KPMG International), una entidad suiza.
mailto:[email protected]:[email protected]

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Isa 700 Audit Opinion

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