AUDIT REPORT

MARK GLENN G. PARPAN, CPA

STANDARDS ON AUD REPORT

PSA 700 (REVISED)—FORMING AN OPINION AND

REPORTING ON FINANCIAL

STATEMENTS
PSA 701—COMMUNICATING KEY AUDIT MATTERS
IN THE INDEPENDENT AUDITOR’S REPORT
STANDARDS ON AUD REPORT

PSA 705 (REVISED)—MODIFICATIONS TO THE

OPINION IN THE INDEPENDENT AUDITOR’S
REPORT

PSA 706 (REVISED)—EMPHASIS OF MATTER

PARAGRAPHS AND OTHER MATTER
PARAGRAPHS IN THE INDEPENDENT AUDITOR’S
REPORT
STANDARDS ON AUD REPORT

PSA 710 (Redrafted)—COMPARATIVE

INFORMATION – CORRESPONDING FIGURES AND
COMPARATIVE FINANCIAL STATEMENTS

PSA 720 (Redrafted)—THE AUDITOR’S

RESPONSIBILITY IN RELATION TO OTHER
INFORMATION IN DOCUMENTS CONTAINING
AUDITED FINANCIAL STATEMENTS
TITLE

INDICATES REPORT OF AN INDEPENDENT

AUDITOR

DISTINGUISHES REPOR ISSUED BY OTHERS

ADDRESSEE

COMMONLY THE SHAREHOLDERS/TCWG

REPORT ON AN AUDIT OF FS

USED TO SEPARATE OTHER REPORTING

RESPONSIBILITIES

OMITTED IF NO ORR
OPINION

IDENTIFY WHOSE ENTITY’S FS IS AUDITED

IDENTIFY STATEMENTS COMPRISING FS

SPECIFY DATE/PERIOD COVERED

BASIS FOR OPINION

STATE THAT AUDIT IS CONDUCTED BASED

ON PSA

STATEMENT OF AUDITOR’ RESPONSIBILITY

AND COMPLIANCE WITH ETHICAL
REQUIREMENTS
MATERIAL UNCERTAINTY RELATED
TO GOING CONCERN

IF APPLICABLE
KEY AUDIT MATTERS

• MATTERS THAT ARE MOST SIGNIFICANT

TO THE AUDIT
• REQUIRED IF LISTED ENTITY OR IF LAW
STATES
• PROHIBITED FOR DISCLAIMER
• REQUIRED FOR QUALIFIED/ADVERSE
OTHER INFORMATION

IF APPLICABLE
RESPONSIBILITY OF MGT AND
TCWG

• PREPARATION OF FS
• IMPLEMENTATION OF IC
• ASSESSMENT AND APPROPRIATENESS OF
GOING CONCERN ASSUMPTION
AUDITOR’S RESPONSIBILITY
OTHER REPORTING
ND
RESPONSIBILITES “2 PART”

COMMON FOR SPECIALIZED INDUSTRIES

SUCH AS BANKS, INSURANCE
COMPANIES,REAL ESTATE
NAME OF ENGAGEMENT PARTNER
AND SIGNATURE OF AUDITOR

AUDITOR’S OWN NAME/AUDIT FIRM’S NAME

OR BOTH
AUDITOR’S ADDRESS

LOCATION IN THE JURISDICTION WHERE THE

AUDITOR PRACTICES
DATE OF AUDITOR’S REPORT

- COMPLETION DATE/ LAST DAY OF FIELD

WORK
- DATED ALWAYS AFTER THE BS DATE
- NOT EARLIER THAN DATE OF APPROVAL
OF MGT
THE FOLLOWING IS MODIFIED IN CASE
AUDITOR ISSUES MODIFIED REPORT:

- AUDITOR’S OPINION
- BASIS FOR OPINION
- AUDITOR’S RESPONSIBILITY IN CASE OF
DISCLAIMER
- OMISSION OF KAM IN CASE OF DISCLAIMER
 PHILIPPINE STANDARD ON
AUDITING (PSA) 701

COMMUNICATING KEY AUDIT

MATTERS IN THE INDEPENDENT
AUDITOR’S REPORT
 Key audit matters

Those matters that, in the auditor’s professional

judgment, were of most significance in the audit of
the financial statements of the current period. Key
audit matters are selected from matters
communicated with those charged with governance.
 KEY AUDIT MATTERS PER PSA 701
(DR. M)

• Areas in which the auditor encountered significant

difficulty during the audit
• Areas identified as significant risks or involving
significant auditor judgment.
• Circumstances that required significant modification
of the auditor’s planned approach to the audit
 PHILIPPINE STANDARD ON
AUDITING (PSA) 705

MODIFICATIONS TO THE OPINION IN

THE INDEPENDENT AUDITOR’S
REPORT
1. A measure of uniformity in the form and content of the
auditor’s report is desirable because
a. It helps the auditors avoid legal liability.
b. It helps the readers understand the report.
c. It helps the auditor identify the usual circumstances
that are expected to occur.
d. It makes the auditors more informed of their
responsibilities with respect to audit report.
2. The most common type of audit report contains
a(n):
A. Adverse opinion. C. Disclaimer of opinion.
B.Qualified opinion. D. Unqualified
3. If an auditor is certain an illegal act has a material effect
on financial statements and the clients agrees to adjust
the statements accordingly, the auditor should:

A.Withdraw from the engagement.

B. Disclaim an opinion on the financial statements taken
as a whole.
C. Issue a qualified opinion.
D.Issue an unqualified opinion.
4. An auditor includes an explanatory paragraph in an otherwise
unqualified report in order to emphasize that the entity being
reported on is a subsidiary of another business enterprise. The
inclusion of this paragraph
A. Is appropriate and would not negate the unqualified opinion.
B. Is a qualification.
C. Is a violation of generally accepted reporting standards if this
information is disclosed in footnotes to the financial statements.
D. Necessitates a revision of the opinion paragraph to include
the phrase "with the foregoing explanation."
5. If adequate disclosure is not made by the entity regarding
substantial doubt about its ability to continue as a going
concern, the auditor should include in his report specific
reference to the substantial doubt as to ability of the
company to continue as a going concern and should express:

A. Unqualified opinion with explanatory paragraph

B. A subject to qualified opinion or adverse opinion.
C. Either an “except for” opinion or an adverse opinion.
D. A disclaimer of opinion.
6. If the auditor is precluded by the entity from obtaining
evidence to evaluate whether fraud or error that may be
material to the financial statements has, or is likely to
have, occurred, the auditor should issue a (n):
A.Unqualified opinion with explanatory paragraph.
B. Qualified or adverse opinion.
C. Qualified or disclaimer of opinion.
D.Adverse or disclaimer of opinion.
7. An independent auditor discovers that a payroll
supervisor of the company being audited has
misappropriated P50,000. The company’s total assets
and income before tax are P70 million and P15 million,
respectively. Assuming no other issues affect the report,
the auditor’s report will most likely contain a/an

A.Unmodified opinion C. Adverse opinion.

B. Disclaimer of opinion D.Scope qualification
8. A note to the financial statements of the Prudent Bank
indicates that all of the records relating to the bank’s
business operations are stored on magnetic disks, and that
no emergency backup systems or duplicate disks are stored
because the bank and its auditors consider the occurrence of
a catastrophe to be remote. Based upon this note, the
auditor’s report should express

A. A qualified opinion C. An adverse opinion

B. An unmodified opinion D. A “subject to” opinion
9. When would the auditor refer to the work of an appraiser in the
auditor’s report?

A. An adverse opinion is expressed based on a difference of opinion

between the client and the outside appraiser as to the value of
certain assets.
B. A disclaimer of opinion is expressed because of a scope limitation
imposed on the auditor by the appraiser.
C. A qualified opinion is expressed because of a matter unrelated to
the work of the appraiser.
D. An unqualified opinion is expressed and an emphasis of matter
paragraph is added to disclose the use of the appraiser’s work.
10. An audit report contains the following paragraph:
"Because of the inadequacies in the company's
accounting records during the year ended June
30, 2015, it was not practicable to extend our auditing
procedures to the extent necessary to enable us to obtain
certain evidential matter as it relates to classification of
certain items in the consolidated statements of
operations.“

This paragraph most likely describes

A.A material departure from GAAP requiring a qualified
audit opinion.
B. An uncertainty that should not lead to a qualified
opinion.
C. A material scope restriction requiring a qualification of
the audit opinion.
D.A matter that the auditor wishes to emphasize and
that does not lead to a qualified audit opinion.
 PHILIPPINE STANDARD ON
AUDITING (PSA) 706

EMPHASIS OF MATTER
PARAGRAPHS AND OTHER MATTER
PARAGRAPHS IN THE INDEPENDENT
AUDITOR’S REPORT
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.
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.
1. A measure of uniformity in the form and content of the
auditor’s report is desirable because
a. It helps the auditors avoid legal liability.
b. It helps the readers understand the report.
c. It helps the auditor identify the usual circumstances
that are expected to occur.
d. It makes the auditors more informed of their
responsibilities with respect to audit report.
1. A measure of uniformity in the form and content of the
auditor’s report is desirable because
a. It helps the auditors avoid legal liability.
b. It helps the readers understand the report.
c. It helps the auditor identify the usual circumstances
that are expected to occur.
d. It makes the auditors more informed of their
responsibilities with respect to audit report.
1. A measure of uniformity in the form and content of the
auditor’s report is desirable because
a. It helps the auditors avoid legal liability.
b. It helps the readers understand the report.
c. It helps the auditor identify the usual circumstances
that are expected to occur.
d. It makes the auditors more informed of their
responsibilities with respect to audit report.