ISA 700 – Forming an Opinion and Reporting on Financial Statements

1 Expressing Auditor’s Opinion

Auditor is required to express opinion in auditor’s report. As this report is importance an auditing standard has been issued that guides regarding the format and contents of audit report so that such reports are consistent as consistency supplements the confidence and understanding of the users of financial statements.

One important thing to remember is that ISA 700 deals with the complete set of general purpose financial statements and not with special purpose financial statements. Also it does not deal with the audit of particular financial statement out of complete set or any particular component of financial statement.

2 Objective

According to ISA 700 objective of the auditor is to:

  • Form an opinion on the basis of evidence obtained through application of audit procedures
  • Write a report containing clear expression of auditor’s opinion explaining the basis of such opinion.

Financial Statements – Debrief

Financial statements comprise:

  1. Statement of financial position
  2. Statement of comprehensive income
  3. Statement of changes in Equity
  4. Statement of cash flows
  5. Notes to the accounts

Financial statements serves information needs of users. Every user has different requirements depending on their decisions.

However, organizations cannot serve individual needs of every user therefore; financial statements are prepared considering general needs of users that is capable of meeting majority of information requirements of financial statements. Such financial statements are called general purpose financial statements. The accounting framework used to prepare general purpose financial statements is called general purpose accounting framework.

But in some situations needs are of special nature general purpose financial statements cannot cater. For such special needs special purpose financial statements are prepared using special purpose accounting framework.

ISA 700 helps auditor express opinion on general purpose financial statements. On the other hand to express opinion on special purpose financial statements ISA 800 guidelines are to be followed.