Annexure 3
(REFERENCE–CHAPTER 8 (Question 103)
Illustration 5 of SA-700 (Revised), Forming
an Opinion and Reporting on Financial
Statements
Illustration 5 – Auditor’s Report on Financial Statements of a Non-
Corporate Entity Prepared in Accordance with a General Purpose
Compliance Framework
For purposes of this illustrative auditor’s report, the following circumstances
are assumed:
• Audit of a complete set of financial statements of a non-corporate entity,
required by law or regulation. The audit is not a group audit (i.e., SA
600 does not apply).
• The financial statements are prepared by management of the entity in
accordance with the Financial Reporting Framework (XYZ Laws) of
Jurisdiction X (that is, a financial reporting framework, encompassing
law or regulation, designed to meet the common financial information
needs of a wide range of users, but which is not a fair presentation
framework).
• The terms of the audit engagement reflect the description of
management’s responsibility for the financial statements in SA 210.
• The auditor has concluded an unmodified (i.e., “clean”) opinion is
appropriate based on the audit evidence obtained.
• The relevant ethical requirements that apply to the audit are the Code of
Ethics issued by ICAI12.
• Based on the audit evidence obtained, the auditor has concluded that a
material uncertainty does not exist related to events or conditions that
may cast significant doubt on the entity’s ability to continue as a going
concern in accordance with SA 570 (Revised).
12
Specify any applicable ethical requirements under the relevant laws or regulations
applicable to the entity.
Annexure 3 : Illustration of SA-700
• The auditor is not required, and has otherwise not decided, to
communicate key audit matters in accordance with SA 701.
• Those responsible for oversight of the financial statements differ from
those responsible for the preparation of the financial statements.
• The auditor has no other reporting responsibilities required under local
law.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
Opinion
We have audited the financial statements of ABC & Associates (the entity),
which comprise the balance sheet as at March 31, 20X1, and the Profit and
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Loss Account (and the cash flow statement) for the year then ended, and
notes to the financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying financial statements of the entity are
prepared, in all material respects, in accordance with XYZ Laws.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs)
issued by ICAI. Our responsibilities under those Standards are further
described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the entity in
accordance with the Code of Ethics issued by ICAI and we have fulfilled our
other ethical responsibilities in accordance with the Code of Ethics. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
13
Where applicable.
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FAQs on Unique Document Identification Number (UDIN)
Responsibilities of Management and Those Charged with Governance
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for the Financial Statements
Management is responsible for the preparation of the financial statements in
accordance with XYZ Laws and for such internal control as management
determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for
assessing the entity’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the entity
or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the entity’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with SAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Paragraph 41(b) of this SA explains that the shaded material below can be
located in an Appendix to the auditor’s report. Paragraph 41(c) explains that
when law, regulation or applicable auditing standards expressly permit,
reference can be made to a website of an appropriate authority that contains
the description of the auditor’s responsibilities, rather than including this
material in the auditor’s report, provided that the description on the website
addresses, and is not inconsistent with, the description of the auditor’s
responsibilities below.
As part of an audit in accordance with SAs, we exercise professional
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Or other terms that are appropriate in the context of the legal framework of the
particular entity.
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Annexure 3 : Illustration of SA-700
judgment and maintain professional skepticism throughout the audit. We
also:
• Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. 15
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by management.
• Conclude on the appropriateness of management’s use of the going
concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the entity’s ability to
continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the entity to cease to
continue as a going concern.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
15
This sentence would be modified, as appropriate, in circumstances when the auditor
also has responsibility to issue an opinion on the effectiveness of internal control in
conjunction with the audit of the financial statements.
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We also provide those charged with governance with a statement that we
have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
related safeguards.
For XYZ & Co
Chartered Accountants
(Firm’s Registration No.)
Signature
(Name of the Member Signing the Audit Report)
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(Designation )
(Membership No.)
Place of Signature:
Date:
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Partner or Proprietor, as the case may be.
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