The unmodified auditor's report under AU-C 700 after SAS 134

In this lesson you will

List the required sections of the AU-C 700 report in order
Identify the required statements in the Basis for Opinion section
Describe the auditor responsibilities wording in AU-C 700.35 through .37
Spot common report drafting errors before release

Where the report comes from

SAS 134 rewrote AU-C 700 for audits of financial statements for periods ending on or after December 15, 2021. The report now opens with the opinion and carries an independence statement, explicit going concern responsibilities and a fuller description of the audit. Before you write any of it, AU-C 700.12 through .17 require the evaluation covered in the overall conclusion lesson, and AU-C 700.18 requires an unmodified opinion when you conclude the statements are presented fairly, in all material respects.

The sections in order

Title (AU-C 700.22). It must indicate the report of an independent auditor. "Independent Auditor's Report" is the usual form.

Addressee (AU-C 700.23). Addressed as appropriate in the circumstances, commonly the board or the shareholders.

Opinion (AU-C 700.24 through .27). The first section, headed "Opinion". It identifies the entity, states that the statements have been audited, names each statement, refers to the notes, gives the dates or periods covered, states that the statements present fairly, in all material respects, in accordance with the framework, and identifies the framework and its origin, such as accounting principles generally accepted in the United States of America.

Basis for Opinion (AU-C 700.28). Directly after the opinion. It states that the audit was conducted under GAAS and identifies the United States as the origin of those standards, refers to the auditor's responsibilities section, states that you are required to be independent and meet other ethical responsibilities under the relevant ethical requirements, and states whether you believe the evidence obtained is sufficient and appropriate to provide a basis for the opinion.

Going concern and key audit matters, when applicable (AU-C 700.29 and .30). A going concern section under AU-C 570; key audit matters only when you are engaged to communicate them under AU-C 701.

Responsibilities of Management for the Financial Statements (AU-C 700.31 through .33). Management's responsibility for preparation and fair presentation and for relevant internal control, and, when the framework requires it, for evaluating whether conditions or events raise substantial doubt about going concern. Do not reference a separate management statement.

Auditor's Responsibilities for the Audit of the Financial Statements (AU-C 700.34 through .37). The objectives (reasonable assurance and issuing a report); that reasonable assurance is a high level of assurance but not absolute and not a guarantee; that the risk of not detecting fraud is higher than for error; that misstatements are material if there is a substantial likelihood they would influence the judgment of a reasonable user. AU-C 700.36 then lists your responsibilities: exercise professional judgment and maintain professional skepticism; identify and assess risks and respond to them; obtain an understanding of internal control relevant to the audit but not to opine on its effectiveness; evaluate policies, estimates and overall presentation; and conclude on substantial doubt about going concern. AU-C 700.37 adds that you communicate with governance about scope and timing, significant findings and certain internal control matters.

Other information, when applicable (AU-C 700.38). Reported under AU-C 720.

Other reporting responsibilities (AU-C 700.39 and .40). A separate "Report on Other Legal and Regulatory Requirements" section after the "Report on the Audit of the Financial Statements".

Signature, city and state, and date (AU-C 700.41 through .43). The firm's manual or printed signature, the city and state where the report is issued, and a date no earlier than when you obtained sufficient appropriate evidence, including evidence that all statements and disclosures have been prepared and management has asserted responsibility for them.

Comparative statements

AU-C 700.47 and .48 require the report to cover each period presented on which you opine, and a continuing auditor updates the prior-period opinion. When a predecessor audited the prior year and does not reissue its report, AU-C 700.57 requires an other-matter paragraph naming the predecessor's opinion.

Drafting errors peer reviewers flag

Basis for Opinion missing the independence statement or the country of origin.
The old report order, with the opinion at the end.
Statement titles in the opinion that do not match the statements themselves.
A going concern section added when substantial doubt was alleviated, or missing when it remains.
Report dated before management approved the final statements.

Start from the unmodified report template and compare with the annotated report example.

Worked example

Lakeshore Printing Co.: reviewing a draft report

Lakeshore Printing Co. has comparative years ended December 31, 2025 and 2024, both audited by the same firm. The draft report reads:

Title: "Independent Auditor's Report". Acceptable.
First section: "Basis for Opinion", then "Opinion". Error: AU-C 700.24 requires the opinion first.
Opinion names "the balance sheet, statement of operations and statement of cash flows". The client's statements also include a statement of changes in stockholders' equity. Error: AU-C 700.25c requires each statement to be identified.
Basis for Opinion omits "We are required to be independent of Lakeshore Printing Co. and to meet our other ethical responsibilities". Error: AU-C 700.28c.
The report is dated March 12, 2026. Management approved the final notes on March 18, 2026. Error: AU-C 700.43 bars a date before management has taken responsibility for the complete statements.

Fixes: reorder the sections, add the missing statement, add the independence sentence, and date the report March 18, 2026. The representation letter moves to March 18 as well under AU-C 580.20, and the subsequent events procedures extend 6 days, from March 12 to March 18.

Result: four errors in one draft, each traceable to a specific AU-C 700 paragraph.

Self-check

Answer each question before you open the answer.

Which section must come first in an AU-C 700 report?
Show answer
The Opinion section. AU-C 700.24 requires the first section to include the opinion with the heading "Opinion".
What four things must the Basis for Opinion section contain?
Show answer
Under AU-C 700.28: that the audit was conducted under GAAS of the United States of America, a reference to the auditor's responsibilities section, the independence and ethics statement, and whether the evidence is sufficient and appropriate to support the opinion.
Does an unmodified report include a Key Audit Matters section?
Show answer
Only when you are engaged to communicate key audit matters. AU-C 700.30 points to AU-C 701, which applies only by engagement for nonissuers.
Can the report be dated before management approves the notes?
Show answer
No. AU-C 700.43 requires evidence that all statements and disclosures have been prepared and that management has asserted responsibility for them.

Sources

Back to the syllabus

Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error