In this topic 7 sections
- 29Convert completed work into a conclusion
- 30Read the financial statements as a connected account
- 31Distinguish fair presentation from compliance
- 32Understand what each report section does
- 33Keep preparation, oversight and audit responsibilities clear
- 34Date the report when the conclusion is ready
- 35Sources and further reading
Convert completed work into a conclusion
The auditor's opinion addresses identified financial statements, a reporting period and a financial reporting framework. It does not grade commercial decisions. A loss-making entity can receive an unmodified opinion when its reporting is appropriate and supported by evidence. A profitable entity can receive a modified opinion for a material reporting problem.
Begin with the evidence conclusion, then select the report that communicates it. Explain what supports the opinion, what remains uncertain and how that uncertainty affects the conclusion.
For an unmodified opinion, the auditor concludes that the statements comply with the applicable framework in all material respects. This requires reasonable assurance about the statements as a whole, taking account of evidence sufficiency, uncorrected misstatements and the overall quality of the reporting. Reasonable assurance is high assurance; it does not promise the discovery of every error or guarantee the entity's future success.
Concept sources: ASA 700, December 2023, paragraphs 10–16 and 38 — the basis of the opinion and the meaning of reasonable assurance.
- Identify the framework and reporting period
- Resolve the evidence conclusions
- Evaluate remaining misstatements and presentation
- Determine the opinion
- Select the additional reporting sections
- Confirm readiness to sign
Read the financial statements as a connected account
Completion involves more than confirming that individual balances agree with tested schedules. Consider whether accounting policies fit the transactions, estimates and related disclosures are reasonable, terminology is clear, and material events are explained. Assess management's judgements for possible bias. Read the notes with the primary statements to see whether their combined message makes sense.
| Completion question | Why it matters | Application to the review |
|---|---|---|
| Do policy descriptions explain the entity's actual transactions? | Generic wording may conceal an important accounting choice. | Compare the policy note with the contracts tested during the audit. |
| Are judgements explained clearly? | A sound calculation can still be accompanied by inadequate disclosure. | Read the explanation of an estimate alongside the assumptions supporting it. |
| Does aggregation preserve useful information? | Combining unlike items can hide a significant exposure. | Consider whether a broad balance needs separate explanation. |
| Does the overall presentation reflect the underlying events? | Correct arithmetic does not establish an appropriate overall message. | Follow a major transaction through the statements and related notes. |
Concept sources: ASA 700, December 2023, paragraphs 12–15 and A1–A9 — qualitative evaluation, disclosure and overall presentation; the review questions are an original study aid.
Distinguish fair presentation from compliance
Both framework types require compliance with their requirements. A fair presentation framework also recognises that extra disclosure may be needed to convey the underlying position fairly, or explicitly recognises that an exceptionally rare departure may be necessary. The definition does not mean that every fair presentation framework permits departures. The auditor evaluates both compliance and fair presentation.
A compliance framework lacks those additional acknowledgements. The opinion addresses preparation under its requirements. Nevertheless, in the extremely rare situation where compliant statements appear misleading, the auditor discusses the problem with management and considers whether and how the report should explain it. Compliance is therefore not a reason to disregard a clearly misleading outcome.
Fair presentation opinions use the concepts of presenting fairly or giving a true and fair view. Compliance opinions describe preparation under the framework. Identify the framework so readers understand the assessment criteria.
Concept sources: ASA 700, December 2023, paragraphs 7(b), 14–19 and 25–27 — framework definitions, evaluation and opinion formulation.
For Australian annual financial reports under the Corporations Act, section 297's true and fair requirement does not override section 296's accounting-standard obligations. Necessary additional information belongs in the notes under section 295(3)(c). Section 308 establishes the auditor's reporting duty on compliance and true and fair presentation. Do not treat the general framework definition as permission to disregard an Australian accounting requirement.
Concept sources: Corporations Act 2001, 9 April 2024 compilation, sections 295(3)(c), 296–297 and 308 — the Australian statutory relationship between compliance and true and fair reporting.
Understand what each report section does
The report is a written communication with an independent-auditor title and an appropriate addressee. Its first section gives the opinion and identifies the audited entity, statements, notes and periods. The Basis for Opinion section follows immediately. This makes the conclusion and its foundation easy to locate.
| Report component | Reader's question answered |
|---|---|
| Opinion | What conclusion did the auditor reach, and which financial information does it cover? |
| Basis for Opinion | Which auditing standards and ethical requirements apply, and is the evidence an adequate basis? |
| Going concern reporting, where required | Does a going concern conclusion need a specific explanation? |
| Key Audit Matters, where applicable | Which matters were most significant in the current audit, and how were they addressed? |
| Other Information, where applicable | What responsibilities apply to the accompanying information? |
| Responsibilities for the financial statements | Who prepares the statements and oversees financial reporting? |
| Auditor's responsibilities | What does an audit seek to achieve, and what are its boundaries? |
| Other legal and regulatory reporting | Which additional reporting duties are addressed? |
| Signature, identity, location and date | Who issues the report, from where, and when? |
The prescribed opening order does not make the whole report a fixed layout. Circumstances determine additional sections. The historical Australian standard requires the partner's name where law or regulation requires it.
Concept sources: ASA 700, December 2023, paragraphs 20–32, 43–49, Aus 28.1(c), Aus 46.1 and A19 — report elements, opening order and Australian additions.
Keep preparation, oversight and audit responsibilities clear
Management prepares the financial statements and maintains the internal control it considers necessary for reliable reporting. It also assesses going concern and makes appropriate disclosures. Those charged with governance oversee financial reporting where that role is separate. The report uses titles appropriate to the entity's legal structure, which may refer to directors rather than management.
The auditor independently evaluates the evidence and reports the resulting opinion. The responsibilities description explains risk assessment, responsive procedures, accounting judgements, going concern and overall presentation. Understanding controls helps design the financial statement audit; it does not normally create a separate opinion on control effectiveness. The description also explains communication with governance. Some prescribed detail may appear in an appendix or through a permitted reference to an appropriate authority's website.
Concept sources: ASA 700, December 2023, paragraphs 33–42 and Aus A57.1 — respective responsibilities and permitted locations of their description.
The Australian independence declaration is a separate statutory communication. Section 307C requires the individual or lead auditor to declare the relevant position to directors, including details of reportable contraventions where applicable. Section 298 requires its inclusion in the directors' report in the relevant cases. Listed-company reporting also addresses non-audit services, fees and directors' assessment of compatibility with independence; audit committee advice is relevant where a committee exists.
Concept sources: Corporations Act 2001, 9 April 2024 compilation, sections 298, 300(11B)–(11E) and 307C — distinct independence communications.
Date the report when the conclusion is ready
The reporting deadline does not determine when the audit evidence becomes sufficient. The report cannot predate the evidence supporting the opinion, completion of all statements and disclosures, and acknowledgement of responsibility by the appropriate authority. The Australian addition requires the report date to be the signing date. Written representations are dated as close as practicable to that date, but not after it.
Concept sources: ASA 700, December 2023, paragraph 49 and Aus 49.1 — evidence, approval and signing; ASA 580, March 2023, paragraph 14 and A15 — timing of written representations.
Sources and further reading
- ASA 700, December 2023 — Forming an Opinion and Reporting on a Financial Report: opinion evaluation, report content and Australian additions.
- Corporations Act 2001, 9 April 2024 compilation: sections 295–308 for the Australian reporting context.
- ASA 580, March 2023 — Written Representations: paragraph 14 and A15 for the connection to the report date.