Section 308(3C) of the Act requires that, if the directors’ report for the financial year includes a Remuneration Report, the auditor must report also to members on whether the auditor is of the opinion that the Remuneration Report complies with section 300A of the Act. If not of that opinion, the auditor’s report must state why.

The requirement to express a distinct opinion on the Remuneration Report in the directors’ report is additional to the auditor’s responsibility to express an opinion on the financial report. In accordance with Auditing Standard ASA 700 Forming an Opinion and Reporting on a Financial Report, the auditor is required to address other reporting responsibilities in a separate section of the auditor’s report that follows the opinion paragraph on the financial report, in order to clearly distinguish them from the auditor’s primary responsibility to express an opinion on the financial report.

Where a company has included a Remuneration Report in the annual directors’ report pursuant to section 300A of the Act, the auditor’s report should identify clearly the paragraph numbers or pages of the directors’ report that have been audited pursuant to section 308(3C) of the Act. This is necessary to avoid any misunderstanding by users as to which part of the directors’ report has been subjected to audit.

Furthermore, the auditor’s report describes the respective responsibilities of the directors and the auditor in relation to the Remuneration Report. See Appendix 1 for an illustrative example of an unmodified report.

The suggested form of opinion on the Remuneration Report, included in the Appendices to this Guidance Statement, does not make reference to materiality. An auditor exercises professional judgement in considering reporting responsibilities under the Act, including considering additional regulatory reporting obligations, such as under section 311 of the Act, for significant breaches of the Act.

Modifications to the auditor’s report in relation to the Remuneration Report are made in accordance with ASA 705 Modifications to the Opinion in the Independent Auditor’s Report. See Appendix 2 for an illustrative example of a modified report.