SA 705 — Modifications to the Opinion (Revised)

Issued by ICAI AASB · Reporting

Qualified, Adverse, Disclaimer — when and how to modify.

Objective

To express clearly a modified opinion when the auditor concludes that the FS are not free from material misstatement, or is unable to obtain sufficient appropriate audit evidence.

Key requirements

Three forms of modified opinion: Qualified, Adverse, Disclaimer
Choice based on (a) nature of the matter — misstatement vs scope limitation — and (b) pervasiveness
Basis for Modified Opinion paragraph quantifying the matter where practicable
Specific language and ordering prescribed

Typical procedures

Documentation of the matter giving rise to the modification
Quantification of effect on FS where practicable
Communication to TCWG before issuing the report

Common pitfalls

Qualified opinion language reads like emphasis-of-matter — does not modify the opinion clearly
Quantification omitted from the Basis paragraph
No TCWG communication of the intention to modify

SA 705 in practice

SA 705 sits in the Reporting phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.

For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.

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SA 701 — Communicating Key Audit Matters

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SA 706 — Emphasis of Matter and Other Matter Paragraphs (Revised)