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Principles
The objectives of the auditor are to:
- Form an opinion on the reliability of the annual accounts and the underlying transactions based on an evaluation of the conclusions drawn from the audit evidence obtained;
- express clearly that opinion through a written report that explains the basis of the opinion.
Instructions
The results of ECA's recurrent reliability audits should be reported in a [link title="Statement%20of%20Assurance" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FStatement-of-Assurance.aspx" /]
.
The opinion on [link title="reliability" link="%2Faware%2FFA%2FPages%2FConcepts%2FObjectives-of-reliability-audits.aspx" /]
of the accounts should be given on the accounts of the auditee [link title="as%20a%20whole" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FNo-piecemeal-opinions.aspx" /]
.
The audit of the consolidated accounts and the [link title="legality%20and%20regularity" link="%2Faware%2FCA%2FPages%2FConcepts%2FObjectives-of-compliance-audit.aspx" /]
of the [link title="underlying%20transactions" link="%2Faware%2FCA%2FPages%2FConcepts%2FUnderlying-transactions.aspx" /]
are two interconnected objectives. The auditor should consider the relationships between these two objectives when reporting the audit.
Forming an opinion
Elements of auditor’s conclusion
The auditor’s conclusion on whether reasonable [link title="assurance" link="%2Faware%2FGAP%2FPages%2FAssurance-engagement.aspx" /]
has been obtained as to whether the consolidated annual accounts taken as a whole are free from [link title="material" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FPlanning%2FMateriality.aspx" /]
misstatement should take into account his/her conclusion whether:
- sufficient appropriate
[link title="audit%20evidence" link="%2Faware%2FGAP%2FPages%2FAudit-evidence.aspx" /]
has been obtained;
[link title="uncorrected%20misstatements%20are%20material%2C%20individually%20or%20in%20aggregate" link="%2Faware%2FFA%2FPages%2FExamination%2FEvaluating-tests-results.aspx" /]
;- the consolidated annual accounts are prepared and presented, in all material respects, in accordance with the requirements of the applicable financial reporting framework. This includes consideration of the
[link title="qualitative%20aspects%20of%20the%20entity%E2%80%99s%20accounting%20practices" link="%23Qualitative-aspects-entitys-accounting-policies" /]
, including indicators of possible bias in management’s judgements. In particular, the auditor evaluates whether, in view of the specific requirements of the applicable financial reporting framework:
- the consolidated annual accounts adequately disclose the significant accounting policies selected and applied;
- the accounting policies selected and applied are consistent with the applicable [link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
and are appropriate;
- the accounting estimates made by management are reasonable;
- the information presented in the consolidated annual accounts is relevant, reliable, comparable and understandable;
- the consolidated annual accounts provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in these accounts;
- the terminology used in the consolidated annual accounts, including their titles, is appropriate;
- the consolidated annual accounts achieve fair presentation, including consideration of:
- the overall presentation, structure and content of the consolidated annual accounts; and
- whether the consolidated annual accounts, including the related explanatory notes, represent the underlying transactions and events in a manner that achieves fair presentation;
- the consolidated annual accounts adequately refer to or describe the applicable
[link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
.
The auditor should obtain sufficient appropriate audit evidence about whether the [link title="comparative%20information" link="%2Faware%2FFA%2FPages%2FReporting%2FComparative-information.aspx" /]
included in the consolidated annual accounts complies, in all material respects, with the applicable [link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
.
The auditor shall identify and assess the risks of material misstatement of the financial statements due to [link title="fraud" link="%2Faware%2FGAP%2FPages%2FFraud.aspx" /]
.
Qualitative aspects of the entity’s accounting policies
Management makes a number of judgements about the amounts and disclosures in the consolidated annual accounts. When considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware of possible bias in management’s judgements. The auditor may conclude that the cumulative effect of a lack of neutrality, together with the effect of uncorrected misstatements, cause the consolidated annual accounts as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s evaluation whether the consolidated annual accounts as a whole are materially misstated include the following:
- selective correction of misstatements brought to management’s attention during the audit;
- possible management bias in the making of accounting estimates.
Fair presentation
There may be cases where the consolidated annual accounts, although prepared and presented in accordance with the specific requirements of a fair presentation framework, do not achieve fair presentation. Where this is the case, management has a responsibility to provide disclosures beyond the specific requirements of the framework or, in extremely rare circumstances, to depart from a specific requirement in the framework to achieve fair presentation of the annual accounts.
Description of the applicable financial reporting framework
Management is responsible for preparing and presenting the consolidated annual accounts in accordance with the applicable [link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
and adequately describing that framework in the consolidated annual accounts. That description is important because it advises users of the consolidated annual accounts of the framework on which the consolidated annual accounts are based.
A description that the consolidated annual accounts are prepared and presented in accordance with a particular applicable [link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
is appropriate only if the consolidated annual accounts comply with all the requirements of that framework effective on the date of the consolidated annual accounts.
A description of the applicable [link title="financial%20reporting%20framework" link="%2Faware%2FFA%2FPages%2FConcepts%2FFinancial-reporting-framework.aspx" /]
that contains imprecise qualifying or limiting language (e.g. “the consolidated annual accounts are in substantial compliance with the accounting rules") is not an adequate description of that framework as it may mislead users of the consolidated annual accounts.
Types of opinions
The auditor can express [link title="unmodified" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FUnmodified-opinion.aspx" /]
or [link title="modified" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FModified-opinion.aspx" /]
opinion on the reliability of the consolidated annual accounts. The detailed flowchart describes how the auditor’s considerations determine the type of opinion.
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[panel panel-style="boxed" title="Related%20documents" icon="book" class="ref-panel"]
[standards]
[link new-window title="ISSAI%20200%2F58-65" link="https%3a%2f%2fwww.issai.org%2fwp-content%2fuploads%2f2020%2f12%2fISSAI-200-English.pdf%23page%3D20" /]
[link new-window title="ISA%20700" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520700" /]
[link new-window title="ISA%20720" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520720%2520(REVISED)" /]
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