Chapter 14

Chapter 14

Audit
Reporti
ng
 Formation of
Opinion
Whether sufficient and
Evidence appropriate evidence
has been obtained

Misstatements

Framework
 Formation of
Evidence Opinion
Whether uncorrected
misstatements, which
are misstatements that Misstatements
the auditor has
accumulated during the
audit and that has not
been corrected, are
material, individually or
in aggregate.
Framework
 Formation of
Evidence Opinion
Misstatements

Whether the financial

statements are
Framework prepared, in all material
respects, in accordance
with the requirements of
the applicable financial
reporting framework.
 Expressio
n of
Type
Unmodified or
Unqualified Opinion Description
Expressed if sufficient and appropriate
evidence has been obtained that the
financial statements are fairly presented in
accordance with the applicable financial
Common phrase used
 Presents fairly, in
all material
respects, or
 Give a true and fair
reporting framework view
Qualified Expressed if there is a material limitation in  Except for
scope or material non-compliance with the
reporting framework but the overall financial
statements remain fairly presented
Adverse Expressed if there is material non-  Do not present
compliance with the reporting framework fairly, in all material
that pervasively affects the financial financial
statements statements
Disclaimer of opinion Expressed if there is a material limitation in  We do not express
the scope of the audit that pervasively a conclusion
affects the financial statements
STANDARD
AUDIT
REPORT
Parts of
the
Standard
Audit
Report
(TAOB-
The title should indicate
that it is a report of an
“independent” auditor. This
distinguishes the report
from reports issued by
other parties.
The addressee depends
on the circumstances of
the engagement. More
often than not, it is
addressed to the
shareholders or to those
charged with governance
of the entity whose
financial statements are
being audited.
This section is intended to:
• Identify the entity whose
financial statements have
been audited,
• State that the financial
statements have been
audited,
• Identify the title of each
statement comprising the
financial statements,
• Refer to the notes, including
the summary of significant
accounting policies, and
• Specify the date of, or period
covered by, each financial
- This section should directly follow the Opinion section which shall:
 State that the audit was conducted in accordance with PSAs,
 Refer to the section of the auditor’s report that describes the auditor’s
responsibilities under the PSAs.
 Include a statement that the auditor is independent of the entity and has
fulfilled the auditor’s other ethical responsibilities. The statement shall identify
the jurisdiction of the origin of the relevant ethical requirements, and
 State 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.
- This section shall describe the management’s responsibility for:
 Preparing the financial statements in accordance with the applicable financial
reporting framework, and
 Internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error, and
 Assessing the entity’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate, and
 Disclosing, if applicable, matters relating to going concern.
- This section shall state the following:
 Overall objectives of the auditor
 Level of assurance (i.e., reasonable assurance)
 Causes of misstatements which may be either due to fraud or error
 Definition of materiality based on the applicable financial reporting framework
 Exercise of professional judgement and maintenance of professional
skepticism during the course of the audit.
 Description of the audit process and the procedures performed by the auditor
The auditor’s report shall be signed. In
the rare circumstances that the auditor
intends not to include the name of the
engagement partner in the auditor’s
report, the auditor shall discuss this
intention with TCWG to inform the
auditor's assessment of the likelihood
and severity of a s significant personal
security threat.
The auditor’s report shall
name the location in the
jurisdiction where the
auditor practices.
The report shall be dated
no earlier that (i.e., on or
after) the date on which
the auditor has obtained
sufficient appropriate
audit evidence on which
to base the auditor’s
opinion on the financial
statements.
 Modifications
to the
Opinion
Types of modified
opinion
Qualified Disclaime
Opinion
r

Adverse
Opinion
 Conditions affecting
the type of modified
opinion
Nature of the matter Pervasiveness of the effects of the matter
Material but not Pervasive Material and Pervasive
Financial statements are Qualified Opinion Adverse Opinion
materially misstated
Inability to obtain sufficient Qualified Opinion Disclaimer of Opinion
appropriate audit evidence
 Management-Imposed
Limitation after
Acceptance of Audit
Engagement
Pervasiveness of the effects of the matter
Nature of matter
Material but not Pervasive Material and Pervasive
Inability to obtain sufficient 1. Withdraw from audit *
appropriate audit evidence 2. If a withdrawal is not
-Due to management – Qualified Opinion practicable or possible,
Imposed limitations after issue a disclaimer of
engagement acceptance opinion**
Form and Content of the
Auditor’s Report with a
Modified
Qualified
Opinion
Opinion
Opinion-Heading
Opinion-Content
Qualified Opinion
If due to departure from reporting framework
“In the auditor’s opinion, except for the effects of the matter(s) described in
the Basis for Qualified Opinion section, the accompanying financial
statements present fairly…”
If due to scope limitation
“In the auditor’s opinion, except for the possible effects of the matter(s)
described in the Basis for Qualified Opinion section the accompanying
financial statements present fairly…”
Basis for Opinion- Basis for Qualified Opinion
Heading
Basis for Opinion- The auditor shall include a description of the matter giving rise to the
Content modification.
Illustration See Exhibit 14-5
Form and Content of the
Auditor’s Report with a
Modified Opinion
Adverse
Opinion
Opinion-Heading
Opinion-Content
Adverse Opinion
“In the auditor’s opinion, because of the significance of the matter(s)
described in the Basis for Adverse Opinion section, the accompanying financial
statements do not present fairly…”
Basis for Opinion- Basis for Adverse Opinion
Heading
Basis for Opinion- If quantitative disclosures are materially misstated
Content Describe and quantify the misstatement if practicable. If not practicable, state
it in this section.

If qualitative disclosures are materially misstated

Explain how the disclosures are misstated.

If material misstatement is due to non-disclosure of information

a. Discuss the non-disclosure with those charged with governance,
b. Describe the nature of the omitted information,
c. If not prohibited and practicable, include the omitted disclosures
Illustration See Exhibit 14-6
Form and Content of the
Auditor’s Report with a
Modified Opinion
Disclaimer of
Opinion
Opinion- Heading Disclaimer of Opinion
Opinion- Content “Because of the significance of the matter described in the Basis for Disclaimer
of Opinion paragraph, we have not been able to obtain sufficient appropriate
audit evidence to provide a basis for an audit opinion. Accordingly, we do not
express an opinion on the FS.”
Basis for Opinion- Basis for Disclaimer of Opinion
Heading
Basis for Opinion- a. Describe the reasons for the inability to obtain sufficient and
Content appropriate evidence. *
b. Shall not refer to the section of the auditor’s report where the
auditor’s responsibilities and described **.
c. Shall not state 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.
Illustration See Exhibit 14-7
 ADDITIONAL
COMMUNICATIONS
IN THE AUDITOR’S
REPORT
Emphasis of
matter
paragraph
(EMP)
Other
Key Audit matters
Matter paragraph
(OMP)
KAM
 p

Key Audit
Matter
KAM

Key audit matters

(KAM) are those
matters that, in the
auditor’s professional
judgment, were of
most significance in
the audit of the
financial statements of
 Mandatory
Communication of key
audit matters
Communicating KAM is required for:
1. Audits of complete sets of general-
purpose financial statements of
listed entities; or
2. Circumstances when the auditor
otherwise decides to communicate
KAM in the auditor’s report, or
3. When law or regulation requires the
communication of KAMs.
However, as mentioned in the
discussion of modifications of opinion,
the auditor shall not communicate
Communicating KAM in
the Auditor’s Report
After determining KAM, the auditor shall
communicate these matters in the
auditor’s report under the heading “Key
Audit Matters” except when:
1. Law or regulation precludes public
disclosure about the matter, or
2. The auditor determines that the
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
Format of key audit
matters
Heading

Introductory paragraph
Key Reference to the related
Audit disclosure in the financial
Matters statements
Auditor's considerations in
determining the key audit
matter
Auditor's response to the
key audit matter
 ADDITIONAL
COMMUNICATIONS
IN THE AUDITOR’S
REPORT
Emphasis of
matter
paragraph
(EMP)
Other
Key Audit matters
Matter paragraph
(OMP)
KAM
An emphasis of matter paragraph is a
paragraph included in the auditor’s report that
refers to a matter appropriately presented or
disclosed in the financial statements that, in the
auditor’s judgment, is of such importance that it
is fundamental to of
The inclusion users’ understanding
an EMP of the
in the Auditor’s
financial statements.
report is subject to the following conditions:
1. The auditor would not be required to
modify the opinion as a result of the
matter, and
2. The matter has not been determined to
be a KAM to be communicated in the
auditor’s report.
Emphasis of
matter
paragraph
 Format of
emphasis of
matter
paragraph
Heading
Emphasi
s of Reference to the
matter matter being
paragra emphasized
ph Indication that the
matter doesn't
modify the opinion
Circumstances (GUES2T) that
may require on emphasis of
matter paragraph
Going concern assumption

Uncertain outcome of
litigation
Early application of new
accounting standard

Special purpose financial

statements
Subsequent discovery of
facts
Major catastrophe
(Tragedy)
 ADDITIONAL
COMMUNICATIONS
IN THE AUDITOR’S
REPORT
Emphasis of
matter
paragraph
(EMP)
Other
Key Audit matters
Matter paragraph
(OMP)
KAM
 An other matter paragraph is a
paragraph included in the auditor’s report
that refers to a matter other than those
presented or disclosed in the financial
statements that, in the auditor’s
judgement, is relevant to user’s
understanding of the audit, the auditor’s
The inclusion of OMP in the
responsibilities or the auditor’s report.
Auditor’s report is subject to
the following conditions:
Other 1. The inclusion is not
prohibited by law or
matters regulation, and
2. The matter has not been
paragraph determined to be a KAM
to be communicated in
the auditor’s report.
(OMP)
Circumstances (CROWS2)
that may require other
matter paragraph
Comparative information

Restriction on distribution
or use of report
Material inconsistency in
Other information

Inability to Withdraw from

the engagement

Subsequent discovery of
facts
Reporting on more than one Set of
FS prepared using different
frameworks
 Additional
reporting
considerations
Comparative
Information Other
Information
Initial Audit
Engagement
Using the
work of an
Group Audit expert
Engagement
 Additional
reporting
considerations
Comparative
Information
Under the PFRS, a reporting entity is required to
present at least two periods for its complete set of FS.
Furthermore, as per the Revised SRC Rule 68, the
required comparative information to be presented are
For unlisted
as follow: For listed companies
companies
Minimum of two year A minimum of two year
comparative comparative SFP and a
SFPosition, three year comparative
SFPerformance, SCF, SFPerformance, SCF
 Comparative
Information
Corresponding Figures Approach Comparative Financial
Statement Approach
Comparative information where Comparative information where
amounts and other disclosures for the amounts and other disclosures
prior period are included as an integral for the prior period are included
part of the current period financial for comparison with the
statements, and are intended to be financial statements of the
ready-only in relation to the amounts current period but, if audited
and other disclosures relating to the are referred to in the auditor’s
current period referred to as “current opinion.
period figures”
The level of detail may be the same as The level of information
the current period in accordance with included in those comparative
PFRS or could be a little bit less than financial statements is
what is presented un the current period comparable with that of the
 Condition Opinion on Reference to the
Current Period corresponding figures
Comparative
Information
Corresponding and current Unmodified No reference shall be made
years’ figure are fairly stated opinion
Corresponding figures contain Unmodified No reference shall be made
misstatements but were opinion
corrected and resolved during
the current period
Corresponding figures contain Qualified or Reference shall be made since it
misstatements and remain Adverse opinion is the cause (or one of the
unresolved during the current causes) of misstatements.
period
Corresponding figure contain Qualified or Reference shall be made since it
misstatements that were Adverse opinion is the cause (or one of the
discovered during the current cause) of misstatements.
year’s audit
Corresponding figures contain Unmodified Consider including an other
misstatements that were opinion matter paragraph to inform
discovered during the current other users
year’s audit [Link] the corresponding figures
 [Link] type of opinion issued and
reasons of modification as
applicable, and
Audit reporting under [Link] date of that report.
CorrespondingComparative
figures are FS audit
See initial Approach
Consider including an other
unaudited engagements matter paragraph to inform
Condition Reporting Requirement
discussion users
Opinion on prior period FS is Consider including an other matter paragraph
different from the opinion on the to inform users.
current period FS
Prior period FS were audited by Unless the previous auditor’s report is reissued
a previous auditor with the December 31, 20x1 FS, consider
including an other matter paragraph to inform
users that
[Link] comparative FS were audited by the
previous auditor,
[Link] type of opinion issued and reasons of
modification as applicable, and
[Link] date of that report.
Prior period FS were audited by Communicate the misstatement with the
a previous auditor and issued appropriate level of management and/ or TCWG
 Additional
reporting
considerations
Comparative
Information Other
Information
Initial Audit
Engagement
Using the
work of an
Group Audit expert
Engagement
 Additional
reporting
considerations
Initial Audit
Engagement

An auditor may be engaged to perform an

audit of current year FS where the prior year’s
FS were (1) unaudited or (2) audited by a
previous auditor.

In initial audits, the auditor shall obtain

sufficient and appropriate evidence regarding
 Nature of the matter
Initial Audit Pervasiveness of the effects
Engagement of the matter
Material but not Material and
Pervasive Pervasive
Opening balances contain
material misstatements that
materially affect the current
period’s FS
Current period’s accounting
policies are not consistently
applied in relation to opening Qualified Opinion Adverse
balances Opinion
Change in accounting
policies is not appropriately
disclosed
Inability to obtain sufficient
Additional
Disclaimer of
appropriate audit evidence Qualified Opinion
Opinion
regarding opening balances
reporting
considerations
Comparative
Information Other
Information
Initial Audit
Engagement
Using the
work of an
Group Audit expert
Engagement
 Additional
reporting
considerations
Group Audit
Engagement
 Additional
reporting
considerations
Group Audit
Engagement
 Additional
reporting
considerations
Comparative
Information Other
Information
Initial Audit
Engagement
Using the
work of an
Group Audit expert
Engagement
 Additional
reporting
considerations
Other
Information

The management or TCWG normally issue an

annual report to its stakeholders which
accompanies or contains the FS and the
auditor’s report. It includes information about
the entity’s developments, its future outlook
and risks and uncertainties, a statement by
the entity’s governing body, and reports
 Additional
reporting
considerations
Other
Information

The objectives of the auditor over other

information include the following:
a. To consider whether there is a material
inconsistency between the other information
a. The financial statements,
b. The auditor’s knowledge obtained in the audit.
b. To respond appropriately if there is a material
 Additional
reporting
considerations
Other
Information

A. Audit procedures over other information

Obtain Consid
Discuss
the Determ er the
the
annual Read ine any impact
annual
report the materi of
report
in a annual al materi
with
timely report inconsi al
manag
manne stency inconsi
ement
r stency
 Other
Information

B. Responding to a material inconsistency

Circumstance Effects on the Auditor’s Report
There is material If management refuses to correct the
inconsistency and material misstatement in the FS, it may
financial statements warrant the issuance of a Qualified or
must amended Adverse
There is a material Since the FS are fairly presented, an
inconsistency and Unqualified opinion will be expressed.
other information
must be amended However, users must be notified about the
material inconsistency. With this, the
auditor shall discuss the material
 Additional
reporting
considerations
Other
Information

C. Responding to a material misstatement of fact

If the auditor becomes aware that the other

information appears to include material
misstatement of fact, the auditor should discuss
the matter with the entity’s management.
 Additional
reporting
considerations
Comparative
Information Other
Information
Initial Audit
Engagement
Using the
work of an
Group Audit expert
Engagement
 Additional
reporting
considerations
Using the
work of an
expert
The auditor should asses the appropriateness of
the expert’s work as audit evidence regarding the
FS assertion being considered.
 Using the
work of an
expert

This will involve assessment of whether the substance of

the expert’s findings is properly reflected in the FS or
Assumptions
supports the FS assertion and consideration of:
and methods
Source data used and Results of the
used consistency expert’s work
with prior
periods
 Using the
work of an
expert

If the result of the expert’s work do not provide

sufficient appropriate audit evidence or if the results
are not consistent with other audit evidence, the
auditor should resolve the matter.

This may involve the following procedures:

a. Discussions with the entity and the expert,
b. Applying additional procedures, including possibly
engaging another expert,
THANK
YOU!