Scribd
Upload
648 views8 pages

Psa 705 Notes and Summary

This document provides guidance for auditors on modifying their audit opinions. It establishes three types of modified opinions: qualified opinions, adverse opinions, and disclaimers of opinions. A qualified opinion is issued when misstatements are material but not pervasive. An adverse opinion is used when misstatements are both material and pervasive. A disclaimer is appropriate when the auditor cannot obtain sufficient evidence and misstatements could be both material and pervasive, or in rare cases involving multiple uncertainties.

Uploaded by

Ejk
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
648 views8 pages

Psa 705 Notes and Summary

This document provides guidance for auditors on modifying their audit opinions. It establishes three types of modified opinions: qualified opinions, adverse opinions, and disclaimers of opinions. A qualified opinion is issued when misstatements are material but not pervasive. An adverse opinion is used when misstatements are both material and pervasive. A disclaimer is appropriate when the auditor cannot obtain sufficient evidence and misstatements could be both material and pervasive, or in rare cases involving multiple uncertainties.

Uploaded by

Ejk
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 8

Introduction

Scope of this PSA

1. This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibility

to issue an appropriate report in circumstances when, in forming an opinion in

accordance with PSA 700 (Redrafted),1

the auditor concludes that a modification

to the auditor’s opinion on the financial statements is necessary.

Types of Modified Opinions

2. This PSA establishes three types of modified opinions, namely, a qualified

opinion, an adverse opinion, and a disclaimer of opinion. The decision regarding

which type of modified opinion is appropriate depends upon: (Ref: Para. A1)
(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 judgment about the pervasiveness of the effects or possible

effects of the matter on the financial statements.

Effective Date

3. This PSA is effective for audits of financial statements for periods beginning on or

after December 15, 2009.

Objective
4. The objective of the auditor is to express clearly an appropriately modified

opinion on the financial statements that is necessary when:

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

financial statements as a whole are not free from material misstatement; or

(b) The auditor is unable to obtain sufficient appropriate audit evidence to

conclude that the financial statements as a whole are free from material

misstatement.

Definitions

5. For purposes of the PSAs, the following terms have the meanings attributed

below:

(a) Pervasive – A term used, in the context of misstatements, to describe the


effects on the financial statements of misstatements or the possible effects on

the financial statements of misstatements, if any, that are undetected due to

an inability to obtain sufficient appropriate audit evidence. Pervasive effects

on the financial statements are those that, in the auditor’s judgment:

(i) Are not confined to specific elements, accounts or items of the

financial statements;

(ii) If so confined, represent or could represent a substantial proportion of

the financial statements; or

(iii) In relation to disclosures, are fundamental to users’ understanding of

the financial statements.

(b) Modified opinion – A qualified opinion, an adverse opinion or a disclaimer


of opinion.

Requirements

Circumstances When a Modification to the Auditor’s Opinion Is Required

6. The auditor shall modify the opinion in the auditor’s report when:

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

financial statements as a whole are not free from material misstatement; or

(Ref: Para. A2-A7)

(b) The auditor is unable to obtain sufficient appropriate audit evidence to

conclude that the financial statements as a whole are free from material

misstatement. (Ref: Para. A8-A12)

Determining the Type of Modification to the Auditor’s Opinion


Qualified Opinion

7. The auditor shall express a qualified opinion when:

(a) The auditor, having obtained sufficient appropriate audit evidence,

concludes that misstatements, individually or in the aggregate, are material,

but not pervasive, to the financial statements; or

(b) The auditor is unable to obtain sufficient appropriate audit evidence on

which to base the opinion, but the auditor concludes that the possible effects 6

on the financial statements of undetected misstatements, if any, could be

material but not pervasive.


Adverse Opinion

8. The auditor shall express an adverse opinion when the auditor, having obtained

sufficient appropriate audit evidence, concludes that misstatements, individually

or in the aggregate, are both material and pervasive to the financial statements.

Disclaimer of Opinion

9. The auditor shall disclaim an opinion when the auditor is unable to obtain

sufficient appropriate audit evidence on which to base the opinion, and the auditor

concludes that the possible effects on the financial statements of undetected

misstatements, if any, could be both material and pervasive.

10. The auditor shall disclaim an opinion when, in extremely rare circumstances
involving multiple uncertainties, the auditor concludes that, notwithstanding

having obtained sufficient appropriate audit evidence regarding each of the

individual uncertainties, it is not possible to form an opinion on the financial

statements due to the potential interaction of the uncertainties and their possible

cumulative effect on the financial statements.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy