ASA 700

This Auditing Standard deals with the auditor’s responsibility to form an opinion on the financial report.  It also deals with the form and content of the auditor’s report issued as a result of an audit of a financial report.

ASA 701^[1] deals with the auditor’s responsibility to communicate key audit matters in the auditor’s report.  ASA 705^[2] and ASA 706^[3] deal with how the form and content of the auditor’s report are affected when the auditor expresses a modified opinion or includes an Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report.  Other Auditing Standards also contain reporting requirements that are applicable when issuing an auditor’s report. 

This Auditing Standard applies to an audit of a general purpose financial report and is written in that context.  ASA 800^[4] deals with special considerations when a financial report is prepared in accordance with a special purpose framework.  ASA 805^[5] deals with special considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement.  This Auditing Standard also applies to audits for which ASA 800 or ASA 805 apply. 

The requirements of this Auditing Standard are aimed at addressing an appropriate balance between the need for consistency and comparability in auditor reporting globally and the need to increase the value of auditor reporting by making the information provided in the auditor’s report more relevant to users.  This Auditing Standard promotes consistency in the auditor’s report, but recognises the need for flexibility to accommodate particular circumstances of individual jurisdictions.  Consistency in the auditor’s report, when the audit has been conducted in accordance with Auditing Standards, promotes credibility in the global marketplace by making more readily identifiable those audits that have been conducted in accordance with globally recognised standards.  It also helps to promote the user’s understanding and to identify unusual circumstances when they occur. 

[Deleted by the AUASB.  Refer Aus 0.3]

The auditor shall form an opinion on whether the financial report is prepared, in all material respects, in accordance with the applicable financial reporting framework.^[9],^[10]

In order to form that opinion, the auditor shall conclude as to whether the auditor has obtained reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error. That conclusion shall take into account:

1. The auditor’s conclusion, in accordance with ASA 330, whether sufficient appropriate audit evidence has been obtained;^[11]
2. The auditor’s conclusion, in accordance with ASA 450, whether uncorrected misstatements are material, individually or in aggregate;^[12] and
3. The evaluations required by paragraphs 12–15 of this Auditing Standard.

The auditor shall evaluate whether the financial report is prepared, in all material respects, in accordance with the requirements of the applicable financial reporting framework.  This evaluation shall include consideration of the qualitative aspects of the entity’s accounting practices, including indicators of possible bias in management’s judgements. (Ref: Para. A1–A3)

In particular, the auditor shall evaluate whether, in view of the requirements of the applicable financial reporting framework:

1. The financial report appropriately discloses the significant accounting policies selected and applied. In making this evaluation, the auditor shall consider the relevance of the accounting policies to the entity, and whether they have been presented in an understandable manner; (Ref: Para. A4)
2. The accounting policies selected and applied are consistent with the applicable financial reporting framework and are appropriate;
3. The accounting estimates and related disclosures made by management are reasonable;
4. The information presented in the financial report is relevant, reliable, comparable, and understandable. In making this evaluation, the auditor shall consider whether:
   • The information that should have been included has been included, and whether such information is appropriately classified, aggregated or disaggregated, and characterised.
   • The overall presentation of the financial report have been undermined by including information that is not relevant or that obscures a proper understanding of the matters disclosed. (Ref: Para. A5);
5. The financial report provides adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial report; and (Ref: Para. A6)
6. The terminology used in the financial report, including the title of each financial statement, is appropriate.

When the financial report is prepared in accordance with a fair presentation framework, the evaluation required by paragraphs 12–13 of this Auditing Standard shall also include whether the financial report achieves fair presentation. The auditor’s evaluation as to whether the financial report achieves fair presentation shall include consideration of: (Ref: Para A7-A9)

1. The overall presentation, structure and content of the financial report; and
2. Whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

The auditor shall evaluate whether the financial report adequately refers to or describes the applicable financial reporting framework.  (Ref: Para. A10–A15)

The auditor shall express an unmodified opinion when the auditor concludes that the financial report is prepared, in all material respects, in accordance with the applicable financial reporting framework.

If the auditor:

1. concludes that, based on the audit evidence obtained, the financial report as a whole is not free from material misstatement; or
2. is unable to obtain sufficient appropriate audit evidence to conclude that the financial report as a whole is free from material misstatement,

the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.

If the financial report prepared in accordance with the requirements of a fair presentation framework does not achieve fair presentation, the auditor shall discuss the matter with management and, depending on the requirements of the applicable financial reporting framework and how the matter is resolved, shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with ASA 705. (Ref: Para. A16)

When the financial report is prepared in accordance with a compliance framework, the auditor is not required to evaluate whether the financial report achieves fair presentation.  However, if in extremely rare circumstances the auditor concludes that such a financial report is misleading, the auditor shall discuss the matter with management and, depending on how it is resolved, shall determine whether, and how, to communicate it in the auditor’s report.  (Ref: Para. A17)

The auditor’s report shall be in writing.  (Ref: Para. A18–A19)

Auditor’s Report for Audits Conducted in Accordance with Australian Auditing Standards

Title

The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor. (Ref: Para. A20)

Addressee

The auditor’s report shall be addressed, as appropriate, based on the circumstances of the engagement. (Ref: Para. A21)

Auditor’s Opinion

The first section of the auditor’s report shall include the auditor’s opinion, and shall have the heading “Opinion.”

The Opinion section of the auditor’s report shall also:

1. Identify the entity whose financial report has been audited;
2. State that the financial report has been audited;
3. Identify the title of each statement comprising the financial report;
4. Refer to the notes, including the summary of significant accounting policies; and
5. Specify the date of, or period covered by, each financial statement comprising the financial report. (Ref: Para. A22–A23)

When expressing an unmodified opinion on a financial report prepared in accordance with a fair presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use one of the following phrases, which are regarded as being equivalent:

1. In our opinion, the accompanying financial report presents fairly, in all material respects, […] in accordance with [the applicable financial reporting framework]; or
2. In our opinion, the accompanying financial report gives a true and fair view of […] in accordance with [the applicable financial reporting framework]. (Ref: Para. A24–A31)

When expressing an unmodified opinion on a financial report prepared in accordance with a compliance framework, the auditor’s opinion shall be that the accompanying financial report is prepared, in all material respects, in accordance with [the applicable financial reporting framework].  (Ref: Para. A26–A31)

If the reference to the applicable financial reporting framework in the auditor’s opinion is not to the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board or International Public Sector Accounting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board, the auditor’s opinion shall identify the jurisdiction of origin of the framework. 

Basis for Opinion

The auditor’s report shall include a section, directly following the Opinion section, with the heading “Basis for Opinion”, that: (Ref: Para. A32)

1. States that the audit was conducted in accordance with Australian Auditing Standards; (Ref: Para. A33)
2. Refers to the section of the auditor’s report that describes the auditor’s responsibilities under the Australian Auditing Standards;
3. [Deleted by the AUASB. Refer Aus 28.1(c)]
4. Aus 28.1(c) - Includes a statement that the auditor is independent of the entity in accordance with the relevant ethical requirements relating to the audit, and has fulfilled the auditor’s other ethical responsibilities in accordance with these requirements. The statement shall identify the relevant ethical requirements applicable within Australia; and (Ref: Para. Aus A34.1–A39)
4. States whether the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.

Going Concern

Where applicable, the auditor shall report in accordance with ASA 570.^[13]

Key Audit Matters

For audits of financial reports of listed entities, the auditor shall communicate key audit matters in the auditor’s report in accordance with ASA 701.

When the auditor is otherwise required by law or regulation or decides to communicate key audit matters in the auditor’s report, the auditor shall do so in accordance with ASA 701.  (Ref: Para. A40–A43)

Other Information

Where applicable, the auditor shall report in accordance with ASA 720.^[14]

Responsibilities for the Financial Report

The auditor’s report shall include a section with a heading “Responsibilities of Management for the Financial Report.”  The auditor’s report shall use the term that is appropriate in the context of the legal framework in the particular jurisdiction and need not refer specifically to “management”.  In some jurisdictions, the appropriate reference may be to those charged with governance.  (Ref: Para. A44)

This section of the auditor’s report shall describe management’s responsibility for: (Ref: Para. A45–A48)

1. Preparing the financial report in accordance with the applicable financial reporting framework, and for such internal control as management determines is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error; and
2. Assessing the entity’s ability to continue as a going concern^[15] and whether the use of the going concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to going concern. The explanation of management’s responsibility for this assessment shall include a description of when the use of the going concern basis of accounting is appropriate. (Ref: Para. A48)

This section of the auditor’s report shall also identify those responsible for the oversight of the financial reporting process, when those responsible for such oversight are different from those who fulfill the responsibilities described in paragraph 34 of this Auditing Standard.  In this case, the heading of this section shall also refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal framework in the particular jurisdiction.  (Ref: Para. A49)

When the financial report is prepared in accordance with a fair presentation framework, the description of responsibilities for the financial report in the auditor’s report shall refer to “the preparation and fair presentation of this financial report” or “the preparation of the financial report that gives a true and fair view,” as appropriate in the circumstances.

Auditor’s Responsibilities for the Audit of the Financial Report

The auditor’s report shall include a section with the heading “Auditor’s Responsibilities for the Audit of the Financial Report.”

This section of the auditor’s report shall: (Ref: Para. A50)

1. State that the objectives of the auditor are to:
   1. Obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error; and
   2. Issue an auditor’s report that includes the auditor’s opinion. (Ref: Para. A51)
2. State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists; and
3. State that misstatements can arise from fraud or error, and either:
   1. Describe that they 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 this financial report; or ^[16]
   2. Provide a definition or description of materiality in accordance with the applicable financial reporting framework. (Ref: Para. A52)

The Auditor’s Responsibilities for the Audit of the Financial Report section of the auditor’s report shall further: (Ref: Para. A50)

1. State that, as part of an audit in accordance with Australian Auditing Standards, the auditor exercises professional judgement and maintains professional scepticism throughout the audit.
2. Describe an audit by stating that the auditor’s responsibilities are:
   1. To identify and assess the risks of material misstatement of the financial report, whether due to fraud or error; to design and perform audit procedures responsive to those risks; and to obtain audit evidence that is sufficient and appropriate to provide a basis for the auditor’s 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;
   2. To 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. In circumstances when the auditor also has a responsibility to express an opinion on the effectiveness of internal control in conjunction with the audit of the financial report, the auditor shall omit the phrase that the auditor’s consideration of internal control is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control;
   3. To evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
   4. To 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 the auditor concludes that a material uncertainty exists, the auditor is required to draw attention in the auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify the opinion. The auditor’s conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause an entity to cease to continue as a going concern; and
   5. When the financial report is prepared in accordance with a fair presentation framework, to evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
3. When ASA 600^[17] applies, further describe the auditor’s responsibilities in a group audit engagement by stating that:
   1. The auditor’s responsibilities are to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the group financial report;
   2. The auditor is responsible for the direction, supervision and performance of the group audit; and
   3. The auditor remains solely responsible for the auditor’s opinion.

The Auditor’s Responsibilities for the Audit of the Financial Report section of the auditor’s report also shall: (Ref: Para. A50)

1. State that the auditor communicates 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 the auditor identifies during the audit;
2. For audits of the financial report of listed entities, state that the auditor provides those charged with governance with a statement that the auditor has complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on the auditor’s independence, and where applicable, actions taken to eliminate threats or safeguards applied; and
3. For audits of the financial report of listed entities and any other entities for which key audit matters are communicated in accordance with ASA 701, state that, from the matters communicated with those charged with governance, the auditor determines those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. The auditor describes these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. (Ref: Para. A53)

Location of the description of the auditor’s responsibilities for the audit of the financial report

The description of the auditor’s responsibilities for the audit of the financial report required by paragraphs 39–40 of this Auditing Standard shall be included: (Ref: Para. A54)

1. Within the body of the auditor’s report;
2. Within an appendix to the auditor’s report, in which case the auditor’s report shall include a reference to the location of the appendix; or (Ref: Para. A54–A55)
3. By a specific reference within the auditor’s report to the location of such a description on a website of an appropriate authority, where law, regulation or Australian Auditing Standards expressly permit the auditor to do so. (Ref: Para. A54, A56–A57)

When the auditor refers to a description of the auditor’s responsibilities on a website of an appropriate authority, the auditor shall determine that such description addresses, and is not inconsistent with, the requirements in paragraphs 39–40 of this Auditing Standard.  (Ref: Para. A56)

Early adoption of Auditing Standards

When the auditor elects to early adopt an Auditing Standard made under section 336 of the Corporations Act 2001, in accordance with section 336(4) of that Act, that election is required to be recorded in the auditor’s report.

Other Reporting Responsibilities

If the auditor addresses other reporting responsibilities in the auditor’s report on the financial report that are in addition to the auditor’s responsibilities under the Australian Auditing Standards, these other reporting responsibilities shall be addressed in a separate section in the auditor’s report with a heading titled “Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the section, unless these other reporting responsibilities address the same topics as those presented under the reporting responsibilities required by the Australian Auditing Standards in which case the other reporting responsibilities may be presented in the same section as the related report elements required by the Australian Auditing Standards.  (Ref: Para. A58–A60)

If other reporting responsibilities are presented in the same section as the related report elements required by the Australian Auditing Standards, the auditor’s report shall clearly differentiate the other reporting responsibilities from the reporting that is required by the Australian Auditing Standards.  (Ref: Para. A60)

If the auditor’s report contains a separate section that addresses other reporting responsibilities, the requirements of paragraphs 20–40 of this Auditing Standard shall be included under a section with a heading “Report on the Audit of the Financial Report.”  The “Report on Other Legal and Regulatory Requirements” shall follow the “Report on the Audit of the Financial Report.” (Ref: Para. A60)

Name of the Engagement Partner

[Deleted by the AUASB.  Refer Aus 46.1] 

The name of the engagement partner shall be included in the auditor’s report where required by law or regulation.  (Ref: Para. Aus A61.1–A62)

Signature of the Auditor

The auditor’s report shall be signed.  (Ref: Para. A64–A65)

Auditor’s Address

The auditor’s report shall name the location in the jurisdiction where the auditor practices.

Date of the Auditor’s Report

The auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial report, including evidence that: (Ref: Para. A66–A69)

1. All the statements and disclosures that comprise the financial report have been prepared; and
2. Those with the recognised authority have asserted that they have taken responsibility for the financial report.

The auditor’s report shall be dated as of the date the auditor signs that report.

Auditor’s Report Prescribed by Law or Regulation

If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording of the auditor’s report, the auditor’s report shall refer to Australian Auditing Standards only if the auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A70–A71)

1. A title.
2. An addressee, as required by the circumstances of the engagement.
3. An Opinion section containing an expression of opinion on the financial report and a reference to the applicable financial reporting framework used to prepare the financial report (including identifying the jurisdiction of origin of the financial reporting framework that is not International Financial Reporting Standards or International Public Sector Accounting Standards, see paragraph 26 of this Auditing Standard).
4. An identification of the entity’s financial report that has been audited.
5. [Deleted by the AUASB. Refer Aus 50.1(e)]
6. Aus 50.1(e) - A statement that the auditor is independent of the entity in accordance with the relevant ethical requirements relating to the audit, and has fulfilled the auditor’s other ethical requirements in accordance with these requirements. The statement shall identify the relevant ethical requirements applicable within Australia.
6. Where applicable, a section that addresses, and is not inconsistent with, the reporting requirements in paragraph 22 of ASA 570.
7. Where applicable, a Basis for Qualified (or Adverse) Opinion section that addresses, and is not inconsistent with, the reporting requirements in paragraph 23 of ASA 570.
8. Where applicable, a section that includes the information required by ASA 701, or additional information about the audit that is prescribed by law or regulation and that addresses, and is not inconsistent with, the reporting requirements in that Auditing Standard.^[18] (Ref: Para. A71–A72)
9. Where applicable, a section that addresses the reporting requirements in paragraph 24 of ASA 720.
10. A description of management’s responsibilities for the preparation of the financial report and an identification of those responsible for the oversight of the financial reporting process that addresses, and is not inconsistent with, the requirements in paragraphs 33–36 of this Auditing Standard.
11. A reference to Australian Auditing Standards and the law or regulation, and a description of the auditor’s responsibilities for an audit of the financial report that addresses, and is not inconsistent with, the requirements in paragraphs 37–40 of this Auditing Standard. (Ref: Para. A54–A55)
12. [Deleted by the AUASB. Refer Aus 50.1(l)]
13. Aus 50.1(l) - The name of the engagement partner where required by law or regulation.
13. The auditor’s signature.
14. The auditor’s address.
15. The date of the auditor’s report.

Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction and Australian Auditing Standards

An auditor may be required to conduct an audit in accordance with the auditing standards of a specific jurisdiction (the “other auditing standards”), but may additionally comply with the Australian Auditing Standards in the conduct of the audit. If this is the case, the auditor’s report may refer to Australian Auditing Standards in addition to the other auditing standards, but the auditor shall do so only if: (Ref: Para. A76–A77)

1. There is no conflict between the requirements in the other auditing standards and those in the Australian Auditing Standards that would lead the auditor (i) to form a different opinion, or (ii) not to include an Emphasis of Matter paragraph or Other Matter paragraph that, in the particular circumstances, is required by the Australian Auditing Standards; and
2. The auditor’s report includes, at a minimum, each of the elements set out in paragraphs 50(a)–(o) of this Auditing Standard when the auditor uses the layout or wording specified by the other auditing standards. However, reference to “law or regulation” in paragraph 50(k) of this Auditing Standard shall be read as reference to the other auditing standards. The auditor’s report shall thereby identify such other auditing standards.

When the auditor’s report refers to both the other auditing standards and Australian Auditing Standards, the auditor’s report shall identify the jurisdiction of origin of the other auditing standards. 

(Ref: Para. A78–A84)

If supplementary information that is not required by the applicable financial reporting framework is presented with the audited financial report, the auditor shall evaluate whether, in the auditor’s professional judgement, supplementary information is nevertheless an integral part of the financial report due to its nature or how it is presented.  When it is an integral part of the financial report, the supplementary information shall be covered by the auditor’s opinion.

If supplementary information that is not required by the applicable financial reporting framework is not considered an integral part of the audited financial report, the auditor shall evaluate whether such supplementary information is presented in a way that sufficiently and clearly differentiates it from the audited financial report.  If this is not the case, then the auditor shall ask management to change how the unaudited supplementary information is presented.  If management refuses to do so, the auditor shall identify the unaudited supplementary information and explain in the auditor’s report that such supplementary information has not been audited. 

(Ref: Para. 12)

Management makes a number of judgements about the amounts and disclosures in the financial report. 

ASA 260 contains a discussion of the qualitative aspects of accounting practices.^[19] In 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, causes the financial report as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s evaluation of whether the financial report as a whole is materially misstated include the following:

• The selective correction of misstatements brought to management’s attention during the audit (e.g., correcting misstatements with the effect of increasing reported earnings, but not correcting misstatements that have the effect of decreasing reported earnings).
• Possible management bias in the making of accounting estimates.

ASA 540 addresses possible management bias in making accounting estimates.^[20]  Indicators of possible management bias do not constitute misstatements for purposes of drawing conclusions on the reasonableness of individual accounting estimates.  They may, however, affect the auditor’s evaluation of whether the financial report as a whole is free from material misstatement.

(Ref: Para. 13(a))

In evaluating whether the financial report appropriately discloses the significant accounting policies selected and applied, the auditor’s consideration includes matters such as:

• Whether all disclosures related to the significant accounting policies that are required to be included by the applicable financial reporting framework have been disclosed;
• Whether the information about the significant accounting policies that has been disclosed is relevant and therefore reflects how the recognition, measurement and presentation criteria in the applicable financial reporting framework have been applied to classes of transactions, account balances and disclosures in the financial report in the particular circumstances of the entity’s operations and its environment; and
• The clarity with which the significant accounting policies have been presented.

(Ref: Para. 13(d))

Evaluating the understandability of the financial report includes consideration of such matters as whether:

• The information in the financial report is presented in a clear and concise manner.
• The placement of significant disclosures gives appropriate prominence to them (e.g., when there is perceived value of entity-specific information to users), and whether the disclosures are appropriately cross-referenced in a manner that would not give rise to significant challenges for users in identifying necessary information.

(Ref: Para. 13(e))

It is common for a financial report prepared in accordance with a general purpose framework to present an entity’s financial position, financial performance and cash flows. Evaluating whether, in view of the applicable financial reporting framework, the financial report provides adequate disclosures to enable the intended users to understand the effect of material transactions and events on the entity’s financial position, financial performance and cash flows includes consideration of such matters as:

• The extent to which the information in the financial report is relevant and specific to the circumstances of the entity; and
• Whether the disclosures are adequate to assist the intended users to understand:
  • The nature and extent of the entity’s potential assets and liabilities arising from transactions or events that do not meet the criteria for recognition (or the criteria for de-recognition) established by the applicable financial reporting framework.
  • The nature and extent of risks of material misstatement arising from transactions and events.
  • The methods used and the assumptions and judgements made, and changes to them, that affect amounts presented or otherwise disclosed, including relevant sensitivity analyses.

(Ref: Para. 14)

Some financial reporting frameworks acknowledge explicitly or implicitly the concept of fair presentation.^[21]  As noted in paragraph 7(b) of this Auditing Standard, a fair presentation^[22] financial reporting framework not only requires compliance with the requirements of the framework, but also acknowledges explicitly or implicitly that it may be necessary for management to provide disclosures beyond those specifically required by the framework.^[23]

The auditor’s evaluation about whether the financial report achieves fair presentation, both in respect of presentation and disclosure, is a matter of professional judgement.  This evaluation takes into account such matters as the facts and circumstances of the entity, including changes thereto, based on the auditor’s understanding of the entity and the audit evidence obtained during the audit.  The evaluation also includes consideration, for example, of the disclosures needed to achieve a fair presentation arising from matters that could be material (i.e., in general, misstatements are considered to be material if they could reasonably be expected to influence the economic decisions of the users taken on the basis of the financial report as a whole), such as the effect of evolving financial reporting requirements or the changing economic environment.

Evaluating whether the financial report achieves fair presentation may include, for example, discussions with management and those charged with governance about their views on why a particular presentation was chosen, as well as alternatives that may have been considered. The discussions may include, for example:

• The degree to which the amounts in the financial report is aggregated or disaggregated, and whether the presentation of amounts or disclosures obscures useful information, or results in misleading information.
• Consistency with appropriate industry practice, or whether any departures are relevant to the entity’s circumstances and therefore warranted.

(Ref: Para. 15)

As explained in ASA 200, the preparation of the financial report by management and, where appropriate, those charged with governance requires the inclusion of an adequate description of the applicable financial reporting framework in the financial report.^[24]  That description advises users of the financial report of the framework on which the financial report is based. 

A description that the financial report is prepared in accordance with a particular applicable financial reporting framework is appropriate only if the financial report complies with all the requirements of that framework that are effective during the period covered by the financial report.

A description of the applicable financial reporting framework that contains imprecise qualifying or limiting language (e.g., “the financial report is in substantial compliance with Australian Accounting Standards”) is not an adequate description of that framework as it may mislead users of the financial report. 

Reference to More than One Financial Reporting Framework

In some cases, the financial report may represent that it is prepared in accordance with two financial reporting frameworks (e.g., the Australian Accounting Standards and IFRSs).  This may be because management is required, or has chosen, to prepare the financial report in accordance with both frameworks, in which case both are applicable financial reporting frameworks.  Such description is appropriate only if the financial report complies with each of the frameworks individually.  To be regarded as being prepared in accordance with both frameworks, the financial report needs to comply with both frameworks simultaneously and without any need for reconciling statements.  In practice, simultaneous compliance is unlikely unless the jurisdiction has adopted the other framework (e.g., IFRSs) as its own national framework, or has eliminated all barriers to compliance with it.

A financial report that is prepared in accordance with one financial reporting framework and that contains a note or supplementary statement reconciling the results to those that would be shown under another framework is not prepared in accordance with that other framework.  This is because the financial report does not include all the information in the manner required by that other framework. 

The financial report may, however, be prepared in accordance with one applicable financial reporting framework and, in addition, describe in the notes to the financial report the extent to which the financial report complies with another framework (e.g., a financial report prepared in accordance with Australian Accounting Standards that also describes the extent to which it complies with IFRSs).  Such description may constitute supplementary financial information as discussed in paragraph 54 and is covered by the auditor’s opinion if it cannot be clearly differentiated from the financial report. 

(Ref: Para. 18–19)

There may be cases where the financial report, although prepared in accordance with the requirements of a fair presentation framework, does not achieve fair presentation.  Where this is the case, it may be possible for management to include additional disclosures in the financial report beyond those specifically required by the framework or, in extremely rare circumstances, to depart from a requirement in the framework in order to achieve fair presentation of the financial report.

It will be extremely rare for the auditor to consider a financial report that is prepared in accordance with a compliance framework to be misleading if, in accordance with ASA 210, the auditor determined that the framework is acceptable.^[25]

(Ref: Para. 20)

A written report encompasses reports issued in hard copy and those using an electronic medium.

The Appendix to this Auditing Standard contains illustrations of auditor’s reports on a financial report, incorporating the elements set out in paragraphs 20–49.  With the exception of the Opinion and Basis for Opinion sections, this Auditing Standard does not establish requirements for ordering the elements of the auditor’s report.  However, this Auditing Standard requires the use of specific headings, which are intended to assist in making auditor’s reports that refer to audits that have been conducted in accordance with Australian Auditing Standards more recognisable, particularly in situations where the elements of the auditor’s report are presented in an order that differs from the illustrative auditor’s reports in the Appendix to this Auditing Standard.

Auditor’s Report for Audits Conducted in Accordance with Australian Auditing Standards

Title (Ref: Para. 21)

A title indicating the report is the report of an independent auditor, for example, “Independent Auditor’s Report,” distinguishes the independent auditor’s report from reports issued by others. 

Addressee (Ref: Para. 22)

Law, regulation or the terms of the engagement may specify to whom the auditor’s report is to be addressed in that particular jurisdiction.  The auditor’s report is normally addressed to those for whom the report is prepared, often either to the shareholders or to those charged with governance of the entity whose financial report is being audited. 

Auditor’s Opinion (Ref. Para. 24–26)

Reference to the financial report that has been audited

The auditor’s report states, for example, that the auditor has audited the financial report of the entity, which comprises [state the title of each financial statement and assertion statement comprising the financial report required by the applicable financial reporting framework, specifying the date or period covered by each financial statement and assertion statement] and notes to the financial statements, including a summary of significant accounting policies. 

When the auditor is aware that the audited financial report will be included in a document that contains other information, such as an annual report, the auditor may consider, if the form of presentation allows, identifying the page numbers on which the audited financial report is presented.  This helps users to identify the financial report to which the auditor’s report relates.

“Present fairly, in all material respects” or “give a true and fair view”

The phrases “present fairly, in all material respects,” and “give a true and fair view” are regarded as being equivalent.  Whether the phrase “present fairly, in all material respects,” or the phrase “give a true and fair view” is used in any particular jurisdiction is determined by the law or regulation governing the audit of a financial report in that jurisdiction, or by generally accepted practice in that jurisdiction.  Where law or regulation requires the use of different wording, this does not affect the requirement in paragraph 14 for the auditor to evaluate the fair presentation of the financial report prepared in accordance with a fair presentation framework.

When the auditor expresses an unmodified opinion, it is not appropriate to use phrases such as “with the foregoing explanation” or “subject to” in relation to the opinion, as these suggest a conditional opinion or a weakening or modification of opinion.

Description of the financial report and the matters it presents

The auditor’s opinion covers the financial report as defined by the applicable financial reporting framework.  For example, in the case of many general purpose frameworks, the financial report may include: a statement of financial position, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and related notes, which ordinarily comprise a summary of significant accounting policies and other explanatory information.  In some jurisdictions, additional information may also be considered to be an integral part of the financial report. 

In the case of a financial report prepared in accordance with a fair presentation framework, the auditor’s opinion states that the financial report presents fairly, in all material respects, or gives a true and fair view of, the matters that the financial report are designed to present.  For example, in the case of a financial report prepared in accordance with IFRSs, these matters are the financial position of the entity as at the end of the period and the entity’s financial performance and cash flows for the period then ended.  Consequently, the […] in paragraph 25 and elsewhere in this Auditing Standard is intended to be replaced by the words in italics in the preceding sentence when the applicable financial reporting framework is IFRSs or, in the case of other applicable financial reporting frameworks, be replaced with words that describe the matters that the financial report is designed to present.

Description of the applicable financial reporting framework and how it may affect the auditor’s opinion

The identification of the applicable financial reporting framework in the auditor’s opinion is intended to advise users of the auditor’s report of the context in which the auditor’s opinion is expressed; it is not intended to limit the evaluation required in paragraph 14. The applicable financial reporting framework is identified in such terms as:

“… in accordance with Australian Accounting Standards” or

“… in accordance with accounting principles generally accepted in Jurisdiction X …”

When the applicable financial reporting framework encompasses financial reporting standards and legal or regulatory requirements, the framework is identified in such terms as “… in accordance with Australian Accounting Standards and the requirements of the Corporations Act 2001.”  ASA 210 deals with circumstances where there are conflicts between the financial reporting standards and the legislative or regulatory requirements.^[26]

As indicated in paragraph A13, the financial report may be prepared in accordance with two financial reporting frameworks, which are therefore both applicable financial reporting frameworks. Accordingly, each framework is considered separately when forming the auditor’s opinion on the financial report, and the auditor’s opinion in accordance with paragraphs 25–27 refers to both frameworks as follows:

1. If the financial report complies with each of the frameworks individually, two opinions are expressed: that is, that the financial report is prepared in accordance with one of the applicable financial reporting frameworks (e.g., the Australian Accounting Standards) and an opinion that the financial report is prepared in accordance with the other applicable financial reporting framework. These opinions may be expressed separately or in a single sentence (e.g., the financial report is presented fairly, in all material respects […], in accordance with Australian Accounting Standards and with the other applicable financial reporting framework).
2. If the financial report complies with one of the frameworks but fails to comply with the other framework, an unmodified opinion can be given that the financial report is prepared in accordance with the one framework (e.g., the Australian Accounting Standards) but a modified opinion given with regard to the other framework in accordance with ASA 705.

As indicated in paragraph A15, the financial report may represent compliance with the applicable financial reporting framework and, in addition, disclose the extent of compliance with another financial reporting framework. Such supplementary information is covered by the auditor’s opinion if it cannot be clearly differentiated from the financial report (see paragraphs 53–54 and related application material in paragraphs A78–A84). Accordingly,

1. If the disclosure as to the compliance with the other framework is misleading, a modified opinion is expressed in accordance with ASA 705.
2. If the disclosure is not misleading, but the auditor judges it to be of such importance that it is fundamental to the users’ understanding of the financial report, an Emphasis of Matter paragraph is added in accordance with ASA 706, drawing attention to the disclosure.

Basis for Opinion (Ref: Para. 28)

The Basis for Opinion section provides important context about the auditor’s opinion.  Accordingly, this Auditing Standard requires the Basis for Opinion section to directly follow the Opinion section in the auditor’s report.

The reference to the standards used conveys to the users of the auditor’s report that the audit has been conducted in accordance with established standards. 

Relevant ethical requirements (Ref: Para. Aus 28.1(c))

[Deleted by the AUASB.  Refer Aus A34.1]^[27]

The identification of the relevant ethical requirements increases transparency about those requirements relating to the particular audit engagement.  ASA 200 explains that the auditor is subject to the relevant ethical requirements as described in ASA 102.^[*]

In some jurisdictions, relevant ethical requirements may exist in several different sources, such as the ethical code(s) and additional rules and requirements within law and regulation.  When the independence and other relevant ethical requirements are contained in a limited number of sources, the auditor may choose to name the relevant source(s) (e.g., the name of the code, rule or regulation applicable in the jurisdiction), or may refer to a term that is commonly understood and that appropriately summarises those sources (e.g., independence requirements for audits of private entities in Jurisdiction X).

Law or regulation, Australian Auditing Standards or the terms of an audit engagement may require the auditor to provide in the auditor’s report more specific information about the sources of the relevant ethical requirements, including those related to independence, that applied to the audit of the financial report. 

In determining the appropriate amount of information to include in the auditor’s report when there are multiple sources of relevant ethical requirements relating to the audit of the financial report, an important consideration is balancing transparency against the risk of obscuring other useful information in the auditor’s report.

Considerations specific to group audits

In group audits when there are multiple sources of relevant ethical requirements, including those pertaining to independence, the reference in the auditor’s report to the jurisdiction ordinarily relates to the relevant ethical requirements that are applicable to the group engagement team.  This is because, in a group audit, component auditors are also subject to ethical requirements that are relevant to the group audit.^[28]

The Australian Auditing Standards do not establish specific independence or ethical requirements for auditors, including component auditors, and thus do not extend, or otherwise override, the independence requirements of the relevant ethical requirements or other ethical requirements to which the group engagement team is subject, nor do the Australian Auditing Standards require that the component auditor in all cases to be subject to the same specific independence requirements that are applicable to the group engagement team.  As a result, relevant ethical requirements, including those pertaining to independence, in a group audit situation may be complex.  ASA 600^[29] provides guidance for auditors in performing work on the financial information of a component for a group audit, including those situations where the component auditor does not meet the independence requirements that are relevant to the group audit. 

Key Audit Matters (Ref: Para. 30‑31)

Law or regulation may require communication of key audit matters for audits of entities other than listed entities, for example, entities characterised in such law or regulation as public interest entities. 

The auditor may also decide to communicate key audit matters for other entities, including those that may be of significant public interest, for example because they have a large number and wide range of stakeholders and considering the nature and size of the business.  Examples of such entities may include financial institutions (such as banks, insurance companies, and superannuation funds), and other entities such as charities.

ASA 210 requires the auditor to agree the terms of the audit engagement with management and those charged with governance, as appropriate, and explains that the roles of management and those charged with governance in agreeing the terms of the audit engagement for the entity depend on the governance arrangements of the entity and relevant law or regulation.^[30]  ASA 210 also requires the audit engagement letter or other suitable form of written agreement to include reference to the expected form and content of any reports to be issued by the auditor.^[31]  When the auditor is not otherwise required to communicate key audit matters, ASA 210^[32] explains that it may be helpful for the auditor to make reference in the terms of the audit engagement to the possibility of communicating key audit matters in the auditor’s report and, in certain jurisdictions, it may be necessary for the auditor to include a reference to such possibility in order to retain the ability to do so.

Considerations specific to public sector entities

Listed entities are not common in the public sector.  However, public sector entities may be significant due to size, complexity or public interest aspects.  In such cases, an auditor of a public sector entity may be required by law or regulation or may otherwise decide to communicate key audit matters in the auditor’s report. 

Responsibilities for the Financial Report (Ref: Para. 33–34)

ASA 200 explains the premise, relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit in accordance with Australian Auditing Standards is conducted.^[33]  Management and, where appropriate, those charged with governance accept responsibility for the preparation of the financial report in accordance with the applicable financial reporting framework, including, where relevant, their fair presentation.  Management also accepts responsibility for such internal control as it determines is necessary to enable the preparation of financial report that is free from material misstatement, whether due to fraud or error.  The description of management’s responsibilities in the auditor’s report includes reference to both responsibilities as it helps to explain to users the premise on which an audit is conducted.  ASA 260 uses the term those charged with governance to describe the person(s) or organisation(s) with responsibility for overseeing the entity, and provides a discussion about the diversity of governance structures across jurisdictions and by entity.

There may be circumstances when it is appropriate for the auditor to add to the descriptions of the responsibilities of management and those charged with governance in paragraphs 34–35 to reflect additional responsibilities that are relevant to the preparation of the financial report in the context of the particular jurisdiction or the nature of the entity. 

ASA 210 requires the auditor to agree management’s responsibilities in an engagement letter or other suitable form of written agreement.^[34]  ASA 210 provides some flexibility in doing so, by explaining that, if law or regulation prescribes the responsibilities of management and, where appropriate, those charged with governance in relation to financial reporting, the auditor may determine that the law or regulation includes responsibilities that, in the auditor’s judgement, are equivalent in effect to those set out in ASA 210.  For such responsibilities that are equivalent, the auditor may use the wording of the law or regulation to describe them in the engagement letter or other suitable form of written agreement.  In such cases, this wording may also be used in the auditor’s report to describe the responsibilities as required by paragraph 34(a).  In other circumstances, including where the auditor decides not to use the wording of law or regulation as incorporated in the engagement letter, the wording in paragraph 34(a) is used.  In addition to including the description of management’s responsibilities in the auditor’s report as required by paragraph 34, the auditor may refer to a more detailed description of these responsibilities by including a reference to where such information may be obtained (e.g., in the annual report of the entity or a website of an appropriate authority). 

In some jurisdictions, law or regulation prescribing management’s responsibilities may specifically refer to a responsibility for the adequacy of accounting books and records, or accounting system.  As books, records and systems are an integral part of internal control (as defined in ASA 315^[35]), the descriptions in ASA 210 and in paragraph 34 do not make specific reference to them. 

The Appendix to this Auditing Standard provides illustrations of how the requirement in paragraph 34(b) would be applied when the Australian Accounting Standards are the applicable financial reporting framework.  If an applicable financial reporting framework other than the Australian Accounting Standards is used, the illustrative statements featured in the Appendix to this Auditing Standard may need to be adapted to reflect the application of the other financial reporting framework in the circumstances. 

Oversight of the financial reporting process (Ref: Para. 35)

When some, but not all, of the individuals involved in the oversight of the financial reporting process are also involved in preparing the financial report, the description as required by paragraph 35 may need to be modified to appropriately reflect the particular circumstances of the entity.  When individuals responsible for the oversight of the financial reporting process are the same as those responsible for the preparation of the financial report, no reference to oversight responsibilities is required.

Auditor’s Responsibilities for the Audit of the Financial Report (Ref: Para. 37–40)

The description of the auditor’s responsibilities as required by paragraphs 37–40 may be tailored to reflect the specific nature of the entity, for example, when the auditor’s report addresses a group’s financial report.  [Aus] Illustration 2A in the Appendix to this Auditing Standard includes an example of how this may be done. 

Objectives of the auditor (Ref: Para. 38(a))

The auditor’s report explains that the objectives of the auditor are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes the auditor’s opinion.  These are in contrast to management’s responsibilities for the preparation for the financial report.

Description of materiality (Ref: Para. 38(c))

The Appendix to this Auditing Standard provides illustrations of how the requirement in paragraph 38(c), to provide a description of materiality, would be applied when the Australian Accounting Standards are the applicable financial reporting framework.  If an applicable financial reporting framework other than the Australian Accounting Standards is used, the illustrative report presented in the Appendix to this Auditing Standard may need to be adapted to reflect the application of the other financial reporting framework in the circumstances.

Auditor’s responsibilities relating to ASA 701 (Ref: Para. 40(c))

The auditor may also consider it useful to provide additional information in the description of the auditor’s responsibilities beyond what is required by paragraph 40(c).  For example, the auditor may make reference to the requirement in paragraph 9 of ASA 701 to determine the matters that required significant auditor attention in performing the audit, taking into account areas of higher assessed risk of material misstatement or significant risks identified in accordance with ASA 315; significant auditor judgements relating to areas in the financial report that involved significant management judgement, including accounting estimates that have been identified as having high estimation uncertainty; and the effects on the audit of significant events or transactions that occurred during the period.

Location of the description of the auditor’s responsibilities for the audit of the financial report (Ref: Para. 41, 50(k))

Including the information required by paragraphs 39–40 in an appendix to the auditor’s report or, when law, regulation or Australian Auditing Standards expressly permit, referring to a website of an appropriate authority containing such information may be a useful way of streamlining the content of the auditor’s report.  However, because the description of the auditor’s responsibilities contains information that is necessary to inform users’ expectations of an audit conducted in accordance with Australian Auditing Standards, a reference is required to be included in the auditor’s report indicating where such information can be accessed. 

Location in an appendix (Ref: Para. 41(b), 50(k))

Paragraph 41 permits the auditor to include the statements required by paragraphs 39-40 describing the auditor’s responsibilities for the audit of the financial report in an appendix to the auditor’s report, provided that appropriate reference is made within the body of the auditor’s report to the location of the appendix. The following is an illustration of how such a reference to an appendix could be made in the auditor’s report:

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report 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 Australian Auditing Standards 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 the financial report.

A further description of our responsibilities for the audit of the financial report is included in appendix X of this auditor’s report. This description, which is located at [indicate page number or other specific reference to the location of the description], forms part of our auditor’s report.

Paragraph 41 explains that the auditor may refer to a description of the auditor’s responsibilities located on a website of an appropriate authority, only if expressly permitted by law, regulation or Australian Auditing Standards.  The information on the website that is incorporated in the auditor’s report by way of a specific reference to the website location where such information can be found may describe the auditor’s work, or the audit in accordance with Australian Auditing Standards more broadly, but it cannot be inconsistent with the description required in paragraphs 39–40.  This means that the wording of the description of the auditor’s responsibilities on the website may be more detailed, or may address other matters relating to an audit of the financial report, provided that such wording reflects and does not contradict the matters addressed in paragraphs 39–40. 

An appropriate authority could be the Auditing and Assurance Standards Board, a regulator, or an audit oversight body. Such organisations are well-placed to ensure the accuracy, completeness and continued availability of the standardised information. It would not be appropriate for the auditor to maintain such a website. The following is an illustration of how such a reference to a website could be made in the auditor’s report:

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 Australian Auditing Standards 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 the financial report.

A further description of our responsibilities for the audit of the financial report is located at [Organisation’s] website at: [website address]. This description forms part of our auditor’s report.

When the auditor refers to a description of the auditor’s responsibilities on a website, the appropriate authority is The Auditing and Assurance Standards Board and the website address is http://www.auasb.gov.au/Home.aspx^[*]

Early adoption of Auditing Standards

Unless otherwise stated in an Auditing Standard, the auditor is permitted to apply the standard before the operative date specified therein. Where an Auditing Standard is early adopted, all relevant conforming and consequential amendments must also be early adopted.^# Where the auditor elects to early adopt an Auditing Standard, the election may be recorded in the auditor’s report as an Other Matter paragraph. Refer to ASA 706 for requirements and guidance relevant to Other Matter paragraphs.

Other Reporting Responsibilities (Ref: Para. 43–45)

In some jurisdictions, the auditor may have additional responsibilities to report on other matters that are supplementary to the auditor’s responsibilities under the Australian Auditing Standards.  For example, the auditor may be asked to report certain matters if they come to the auditor’s attention during the course of the audit of the financial report.  Alternatively, the auditor may be asked to perform and report on additional specified procedures, or to express an opinion on specific matters, such as the adequacy of accounting books and records, internal control over financial reporting or other information.  Auditing standards in the specific jurisdiction often provide guidance on the auditor’s responsibilities with respect to specific additional reporting responsibilities in that jurisdiction. 

When the audit of a financial report is conducted in accordance with the Corporations Act 2001 (the “Act”), section 308(3)(b) of that Act requires the auditor to describe in the auditor’s report any deficiency, failure or shortcoming in respect of certain matters referred to in section 307(b), (c) or (d) of that Act.

In some cases, the relevant law or regulation may require or permit the auditor to report on these other responsibilities as part of their auditor’s report on the financial report.  In other cases, the auditor may be required or permitted to report on them in a separate report. 

An example of “other reporting responsibilities” is where a remuneration report is included in a directors’ report and the auditor is required to report in accordance with section 308(3C) of the Corporations Act 2001.

Paragraphs 43–45 permit combined presentation of other reporting responsibilities and the auditor’s responsibilities under the Australian Auditing Standards only when they address the same topics and the wording of the auditor’s report clearly differentiates the other reporting responsibilities from those under the Australian Auditing Standards.  Such clear differentiation may make it necessary for the auditor’s report to refer to the source of the other reporting responsibilities and to state that such responsibilities are beyond those required under the Australian Auditing Standards.  Otherwise, other reporting responsibilities are required to be addressed in a separate section in the auditor’s report with a heading “Report on Other Legal and Regulatory Requirements,” or otherwise as appropriate to the content of the section.  In such cases, paragraph 45 requires the auditor to include reporting responsibilities under the Australian Auditing Standards under a heading titled “Report on the Audit of the Financial Report.”

Name of the Engagement Partner (Ref: Para. Aus 46.1)

[Deleted by the AUASB.  Refer Aus A61.1]

The objective of the firm in ASQM 1^[36] is to design, implement and operate a system of quality management that provides the firm with reasonable assurance that:

• The firm and its personnel fulfill their responsibilities in accordance with professional standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and
• Engagement reports issued by the firm or engagement partners are appropriate in the circumstances. 

Notwithstanding the objective of ASQM 1, naming the engagement partner in the auditor’s report is intended to provide further transparency to the users of the auditor’s report.

Law or regulation may require that the auditor’s report include the name of the engagement partner responsible for audits other than those of a general purpose financial report of listed entities.  The auditor may also be required by law or regulation, or may decide to include additional information beyond the engagement partner’s name in the auditor’s report to further identify the engagement partner, for example, the engagement partner’s professional license number that is relevant to the jurisdiction where the auditor practices.

[ Deleted by the AUASB.]^[*]

Signature of the Auditor (Ref: Para. 47)

The auditor’s signature is either in the name of the audit firm, the personal name of the auditor or both, as appropriate for the particular jurisdiction.  In addition to the auditor’s signature, in certain jurisdictions, the auditor may be required to declare in the auditor’s report the auditor’s professional accountancy designation or the fact that the auditor or firm, as appropriate, has been recognised by the appropriate licensing authority in that jurisdiction. 

Under the Corporations Act 2001, the auditor of a company or registered scheme is required to sign the auditor’s report in both their own name and the name of their firm [section 324AB(3)] or the name of the audit company [section 324AD(1)], as applicable.

In some cases, law or regulation may allow for the use of electronic signatures in the auditor’s report. 

Date of the Auditor’s Report (Ref: Para. 49)

The date of the auditor’s report informs the user of the auditor’s report that the auditor has considered the effect of events and transactions of which the auditor became aware and that occurred up to that date.  The auditor’s responsibility for events and transactions after the date of the auditor’s report is addressed in ASA 560.^[37]

Since the auditor’s opinion is provided on the financial report and the financial report is the responsibility of management, the auditor is not in a position to conclude that sufficient appropriate audit evidence has been obtained until evidence is obtained that all the statements and disclosures that comprise the financial report, have been prepared and management has accepted responsibility for them. 

In some jurisdictions, law or regulation identifies the individuals or bodies (e.g., the directors) that are responsible for concluding that all the statements and disclosures that comprise the financial report, have been prepared, and specifies the necessary approval process.  In such cases, evidence is obtained of that approval before dating the report on the financial report.  In other jurisdictions, however, the approval process is not prescribed in law or regulation.  In such cases, the procedures the entity follows in preparing and finalising its financial report in view of its management and governance structures are considered in order to identify the individuals or body with the authority to conclude that all the statements that comprises the financial report, including the related notes, have been prepared.  In some cases, law or regulation identifies the point in the financial reporting process at which the audit is expected to be complete. 

In some jurisdictions, final approval of the financial report by shareholders is required before the financial report is issued publicly.  In these jurisdictions, final approval by shareholders is not necessary for the auditor to conclude that sufficient appropriate audit evidence has been obtained.  The date of approval of the financial report for purposes of Australian Auditing Standards is the earlier date on which those with the recognised authority determine that all the statements and disclosures that comprise the financial report, have been prepared and that those with the recognised authority have asserted that they have taken responsibility for them. 

Auditor’s Report Prescribed by Law or Regulation (Ref: Para. 50)

ASA 200 explains that the auditor may be required to comply with legal or regulatory requirements in addition to Australian Auditing Standards.^[38]  When the differences between the legal or regulatory requirements and Australian Auditing Standards relate only to the layout and wording of the auditor’s report, the requirements in paragraph 50(a)–(o) set out the minimum elements to be included in the auditor’s report to enable a reference to the Australian Auditing Standards .  In those circumstances, the requirements in paragraphs 21‑49 that are not included in paragraph 50(a)–(o) do not need to be applied including, for example, the required ordering of the Opinion and Basis for Opinion sections. 

Where specific requirements in a particular jurisdiction do not conflict with Australian Auditing Standards, the layout and wording required by paragraphs 21–49 assist users of the auditor’s report in more readily recognising the auditor’s report as a report of an audit conducted in accordance with Australian Auditing Standards. 

Information Required by ASA 701 (Ref: Para. 50(h))

Law or regulation may require the auditor to provide additional information about the audit that was performed, which may include information that is consistent with the objectives of ASA 701, or may prescribe the nature and extent of communication about such matters. 

The Australian Auditing Standards do not override law or regulation that governs an audit of a financial report. When ASA 701 is applicable, reference can only be made to Australian Auditing Standards in the auditor’s report if, in applying the law or regulation, the section required by paragraph 50(h) is not inconsistent with the reporting requirements in ASA 701. In such circumstances, the auditor may need to tailor certain aspects of the communication of key audit matters in the auditor’s report required by ASA 701, for example by:

• Modifying the heading “Key Audit Matters”, if law or regulation prescribes a specific heading;
• Explaining why the information required by law or regulation is being provided in the auditor’s report, for example by making a reference to the relevant law or regulation and describing how that information relates to the key audit matters;
• Where law or regulation prescribes the nature and extent of the description, supplementing the prescribed information to achieve an overall description of each key audit matter that is consistent with the requirement in paragraph 13 of ASA 701.

ASA 210 deals with circumstances where law or regulation of the relevant jurisdiction prescribes the layout or wording of the auditor’s report in terms that are significantly different from the requirements of Australian Auditing Standards, which in particular includes the auditor’s opinion. In these circumstances, ASA 210 requires the auditor to evaluate:

1. Whether users might misunderstand the assurance obtained from the audit of the financial report and, if so,
2. Whether additional explanation in the auditor’s report can mitigate possible misunderstanding.

If the auditor concludes that additional explanation in the auditor’s report cannot mitigate possible misunderstanding, ASA 210 requires the auditor not to accept the audit engagement, unless required by law or regulation to do so. In accordance with ASA 210, an audit conducted in accordance with such law or regulation does not comply with Australian Auditing Standards. Accordingly, the auditor does not include any reference in the auditor’s report to the audit having been conducted in accordance with Australian Auditing Standards.^[39]

Considerations specific to public sector entities

Auditors of public sector entities may also have the ability pursuant to law or regulation to report publicly on certain matters, either in the auditor’s report or in a supplementary report, which may include information that is consistent with the objectives of ASA 701.  In such circumstances, the auditor may need to tailor certain aspects of the communication of key audit matters in the auditor’s report required by ASA 701 or include a reference in the auditor’s report to a description of the matter in the supplementary report. 

Auditor’s Report for Audits Conducted in Accordance with Both Auditing Standards of a Specific Jurisdiction and Australian Auditing Standards  (Ref: Para. 51)

The auditor may refer in the auditor’s report to the audit having been conducted in accordance with both Australian Auditing Standards as well as the other auditing standards when, in addition to complying with the relevant other auditing standards, the auditor complies with each of the Australian Auditing Standards relevant to the audit.^[40]

A reference to both Australian Auditing Standards and the other auditing standards is not appropriate if there is a conflict between the requirements in the Australian Auditing Standards and those in the other auditing standards that would lead the auditor to form a different opinion or not to include an Emphasis of Matter or Other Matter paragraph that, in the particular circumstances, is required by the Australian Auditing Standards.  In such a case, the auditor’s report refers only to the auditing standards (either Australian Auditing Standards or the other auditing standards) in accordance with which the auditor’s report has been prepared. 

(Ref: Para. 53–54)

In some circumstances, the entity may be required by law, regulation or the Australian Auditing Standards, or may voluntarily choose, to present together with the financial report supplementary information that is not required by the applicable financial reporting framework.  For example, supplementary information might be presented to enhance a user’s understanding of the applicable financial reporting framework or to provide further explanation of specific financial statement items.  Such information is normally presented in either supplementary schedules or as additional notes.

Paragraph 53 explains that the auditor’s opinion covers supplementary information that is an integral part of the financial report because of its nature or how it is presented. This evaluation is a matter of professional judgement. To illustrate:

• When the notes to the financial statements include an explanation or the reconciliation of the extent to which the financial report complies with another financial reporting framework, the auditor may consider this to be supplementary information that cannot be clearly differentiated from the financial report. The auditor’s opinion would also cover notes or supplementary schedules that are cross-referenced from the financial report.
• When an additional profit and loss account that discloses specific items of expenditure is disclosed as a separate schedule included as an Appendix to the financial report, the auditor may consider this to be supplementary information that can be clearly differentiated from the financial report.

Supplementary information that is covered by the auditor’s opinion does not need to be specifically referred to in the auditor’s report when the reference to the notes in the description of the statements that comprises the financial report in the auditor’s report is sufficient.

Law or regulation may not require that the supplementary information be audited, and management may decide to ask the auditor not to include the supplementary information within the scope of the audit of the financial report.

The auditor’s evaluation whether unaudited supplementary information is presented in a manner that could be construed as being covered by the auditor’s opinion includes, for example, where that information is presented in relation to the financial report and any audited supplementary information, and whether it is clearly labelled as “unaudited.”

Management could change the presentation of unaudited supplementary information that could be construed as being covered by the auditor’s opinion, for example, by:

• Removing any cross-references from the financial report to unaudited supplementary schedules or unaudited notes so that the demarcation between the audited and unaudited information is sufficiently clear.
• Placing the unaudited supplementary information outside of the financial report or, if that is not possible in the circumstances, at a minimum placing the unaudited notes together at the end of the required notes to the financial report and clearly labelling them as unaudited. Unaudited notes that are intermingled with the audited notes can be misinterpreted as being audited.

The fact that supplementary information is unaudited does not relieve the auditor of the responsibilities described in ASA 720.^[41]