What it is
AU-C 705 has the auditor modify the opinion when the financial statements are materially misstated or when the auditor cannot get sufficient appropriate evidence. Which modification applies depends on the nature of the matter and whether its effects are material or both material and pervasive.
This template puts the choice in a two-by-two table and gives four full reports in the current AU-C 700 structure: qualified for a GAAP departure, qualified for a scope limitation, adverse, and disclaimer. In each, the matter sits in its own Basis section directly after the opinion.
When to use it
- A client will not correct a departure from US GAAP and the effect is material.
- You were unable to obtain evidence on an account, such as an investment, receivable or inventory.
- You need the shape of an adverse or disclaimer report, including how the auditor’s responsibilities section changes.
What’s inside
- A table for choosing the modification by nature of matter and pervasiveness
- Variant A: qualified opinion for a GAAP departure
- Variant B: qualified opinion for a scope limitation
- Variant C: adverse opinion, and Variant D: disclaimer of opinion with its changed responsibilities section
- Drafting notes on where the standard’s wording must be followed closely
Standard cited
This template follows AU-C 705 / AU-C 700. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 705 explained, AU-C 700 explained.
Questions
What makes an effect pervasive?
AU-C 705 describes pervasive effects as those that are not confined to specific elements, accounts or items of the statements, or that, if confined, represent or could represent a substantial proportion of them, or that are fundamental to users’ understanding. It is a judgment, so document it.
Where does the matter go in a modified report?
In a section headed Basis for Qualified Opinion, Basis for Adverse Opinion or Basis for Disclaimer of Opinion, placed immediately after the opinion section.
Why does a disclaimer report look different?
The auditor was not able to obtain a basis for an opinion, so the report does not say the audit was conducted in accordance with GAAS or describe the audit procedures the same way. The responsibilities section is shortened.
Can I withdraw instead of disclaiming?
Where law and regulation allow and it is practicable, AU-C 705 has the auditor consider withdrawing when the auditor cannot get evidence and the possible effects are material and pervasive.
Related templates
- Independent Auditor's Report — Unmodified Opinion (AU-C 700)
- Going Concern Evaluation Memo (AU-C 570 / ASC 205-40)
- Summary of Uncorrected Misstatements (AU-C 450)
Last updated 11/05/2026. All free templates.