(Ref: Para. 5–6)

The audit of the financial report from which the summary financial statements are derived provides the auditor with the necessary knowledge to discharge the auditor’s responsibilities in relation to the summary financial statements in accordance with this Auditing Standard.  Application of this Auditing Standard will not provide sufficient appropriate evidence on which to base the opinion on the summary financial statements if the auditor has not also audited the financial report from which the summary financial statements are derived.

Management’s agreement with the matters described in paragraph 6 may be evidenced by its written acceptance of the terms of the engagement.

Criteria (Ref: Para. 6(a))

The preparation of summary financial statements requires management to determine the information that needs to be reflected in the summary financial statements so that they are consistent, in all material respects, with or represent a fair summary of the audited financial report.  Because summary financial statements by their nature contain aggregated information and limited disclosure, there is an increased risk that they may not contain the information necessary so as not to be misleading in the circumstances.  This risk increases when established criteria for the preparation of summary financial statements do not exist.

Factors that may affect the auditor’s determination of the acceptability of the applied criteria include:

• The nature of the entity;
• The purpose of the summary financial statements;
• The information needs of the intended users of the summary financial statements; and
• Whether the applied criteria will result in summary financial statements that are not misleading in the circumstances.

The criteria for the preparation of summary financial statements may be established by an authorised or recognised standards setting organisation or by law or regulation.  Similar to the case of a financial report, as explained in ASA 210,^[13] in many such cases, the auditor may presume that such criteria are acceptable.

Where established criteria for the preparation of summary financial statements do not exist, criteria may be developed by management, for example, based on practice in a particular industry. Criteria that are acceptable in the circumstances will result in summary financial statements that:

1. Adequately disclose their summarised nature and identify the audited financial report;
2. Clearly describe from whom or where the audited financial report is available or, if law or regulation provides that the audited financial report need not be made available to the intended users of the summary financial statements and establishes the criteria for the preparation of the summary financial statements, that law or regulation;
3. Adequately disclose the applied criteria;
4. Agree with or can be recalculated from the related information in the audited financial report; and
5. In view of the purpose of the summary financial statements, contain the information necessary, and are at an appropriate level of aggregation, so as not to be misleading in the circumstances.

Adequate disclosure of the summarised nature of the summary financial statements and the identity of the audited financial report, as referred to in paragraph A6(a), may, for example, be provided by a title such as “Summary Financial Statements Prepared from the Audited Financial Report for the Year Ended 31 December 20X1.”

(Ref: Para. 8(g))

The auditor’s evaluation whether the audited financial report is available to the intended users of the summary financial statements without undue difficulty is affected by factors such as whether:

• The summary financial statements describe clearly from whom or where the audited financial report is available;
• The audited financial report is on public record; or
• Management has established a process by which the intended users of the summary financial statements can obtain ready access to the audited financial report.

(Ref: Para. 9)

A conclusion, based on an evaluation of the evidence obtained by performing the procedures in paragraph 8, that an unmodified opinion on the summary financial statements is appropriate enables the auditor to express an opinion containing one of the phrases in paragraph 9.  The auditor’s decision as to which of the phrases to use may be affected by generally accepted practice in the particular jurisdiction.

(Ref: Para. 12)

The procedures described in paragraph 8 are often performed during or immediately after the audit of the financial report.  When the auditor reports on the summary financial statements after the completion of the audit of the financial report, the auditor is not required to obtain additional audit evidence on the audited financial report, or report on the effects of events that occurred subsequent to the date of the auditor’s report on the audited financial report since the summary financial statements are derived from the audited financial report and do not update them.

(Ref: Para. 14–15) 

ASA 720 deals with the auditor’s responsibilities relating to other information in an audit of a financial report. In the context of ASA 720, other information is financial or non‑financial information (other than a financial report and the auditor’s report thereon) included in an entity’s annual report. An annual report contains or accompanies the financial report and the auditor’s report thereon.

In contrast, paragraphs 14–15 deal with the auditor’s responsibilities relating to information included in a document that also contains the summary financial statements and the auditor’s report thereon. This information may include:

• Some or all of the same matters as those dealt with in the other information included in the annual report (e.g., when the summary financial statements and the auditor’s report thereon are included in a summary annual report); or
• Matters that are not dealt with in the other information included in the annual report.

In reading the information included in a document containing the summary financial statements and the auditor’s report thereon, the auditor may become aware that such information is misleading and may need to take appropriate action.  Relevant ethical requirements^[14] require the auditor to avoid being knowingly associated with information that the auditor believes contains a materially false or misleading statement, statements or information furnished recklessly, or omits or obscures information required to be included where such omission or obscurity would be misleading.

Information in a Document Containing the Summary Financial Statements that Deals with Some or All of the Same Matters as the Other Information in the Annual Report

When information is included in a document containing the summary financial statements and the auditor’s report thereon and that information deals with some or all of the same matters as the other information included in the annual report, the work performed on that other information in accordance with ASA 720 may be adequate for the purposes of paragraphs 14–15 of this Auditing Standard.

When an uncorrected material misstatement of the other information has been identified in the auditor’s report on the audited financial report and that uncorrected material misstatement relates to a matter that is dealt with in the information in a document containing the summary financial statements and the auditor’s report thereon, a material inconsistency between the summary financial statements and that information may exist or the information may be misleading.

Information in a Document Containing the Summary Financial Statements that Deals with Matters Not Dealt with in the Other Information in the Annual Report

ASA 720, adapted as necessary in the circumstances, may be helpful to the auditor in determining the appropriate action to respond to management’s refusal to make necessary revisions to the information, including considering the implications for the auditor’s report on the summary financial statements.

Elements of the Auditor’s Report

Title (Ref: Para. 16(a))

A title indicating the report is the report of an independent auditor, for example, “Report of the Independent Auditor,” affirms that the auditor has met all of the relevant ethical requirements regarding independence.  This distinguishes the report of the independent auditor from reports issued by others.

Addressee (Ref: Para. 16(b), 17)

Factors that may affect the auditor’s evaluation of the appropriateness of the addressee of the summary financial statements include the terms of the engagement, the nature of the entity, and the purpose of the summary financial statements.

Identification of the Summary Financial Statements (Ref: Para. 16(c))

When the auditor is aware that the summary financial statements will be included in a document that contains information other than the summary financial statements and the auditor’s report thereon, the auditor may consider, if the form of presentation allows, identifying the page numbers on which the summary financial statements are presented.  This helps readers to identify the summary financial statements to which the auditor’s report relates.

Date of the Auditor’s Report (Ref: Para. 16(m), 18)

The person or persons with recognised authority to conclude that the summary financial statements have been prepared and take responsibility for them depend on the terms of the engagement, the nature of the entity, and the purpose of the summary financial statements.

Reference to the Auditor’s Report on the Audited Financial Report (Ref: Para. 19)

Paragraph 19(i) of this Auditing Standard requires the auditor to include a statement in the auditor’s report on the summary financial statements when the auditor’s report on the audited financial report includes communication of one or more key audit matters described in accordance with ASA 701.^[15]  However, the auditor is not required to describe the individual key audit matters in the auditor’s report on the summary financial statements.

The statement(s) and description(s) required by paragraph 19 are intended to draw attention to those matters and are not a substitute for reading the auditor’s report on the audited financial report.  The required descriptions are intended to convey the nature of the matter(s), and need not repeat the corresponding text in the auditor’s report on the audited financial report in its entirety.

Illustrations (Ref: Para.16, 19–21)

The Appendix to this Auditing Standard contains illustrations of auditors’ reports on summary financial statements that variously:

1. Contain unmodified opinions;
2. Are derived from an audited financial report on which the auditor issued modified opinions;
3. Contain a modified opinion;
4. Are derived from an audited financial report where the auditor’s report thereon includes a statement describing an uncorrected material misstatement of the other information in accordance with ASA 720; and
5. Are derived from an audited financial report where the auditor’s report thereon includes a Material Uncertainty Related to Going Concern section and communication of other key audit matters.

(Ref: Para. 23–24)

If the audited financial report contains comparatives, there is a presumption that the summary financial statements also would contain comparatives.  Comparatives in the audited financial report may be regarded as corresponding figures or as comparative financial information.  ASA 710 describes how this difference affects the auditor’s report on the financial report, including, in particular, reference to other auditors who audited the financial report for the prior period.

Circumstances that may affect the auditor’s determination whether an omission of comparatives is reasonable include the nature and objective of the summary financial statements, the applied criteria, and the information needs of the intended users of the summary financial statements.

(Ref: Para. 25)

ASA 700^[16] contains requirements and guidance to be applied when unaudited supplementary information is presented with an audited financial report that, adapted as necessary in the circumstances, may be helpful in applying the requirement in paragraph 25.

(Ref: Para. 26–27)

Other appropriate actions the auditor may take when management does not take the requested action may include informing the intended users and other known third‑party users of the inappropriate reference to the auditor.  The auditor’s course of action depends on the auditor’s legal rights and obligations.  Consequently, the auditor may consider it appropriate to seek legal advice.