Audit report is said to be unmodified if auditor releases such report which has the exactly the same format or contents as are mentioned for the report which should be given if financial statements are giving true and fair view.
Under IAASB auditing standard ISA 700 (read para 20 through 40), the format of the report has been suggested which auditor shall follow if financial statements are giving true and fair view provided the same auditing standards are applicable in the given situation. However, if any addition or deletion is made in this format, the audit report is stand modified.
Under International Standards of Auditing, report is modified in the following two situations:
- When the opinion is not modified but addition of Emphasis of Matter paragraph and/or Other Matters paragraph
- When the opinion is modified
Opinion is modified if auditor concludes that circumstances require that qualified opinion, adverse or disclaimer of opinion should be reported.
In summary here are the situations when auditor’s report is unmodified and modified:
- Unmodified report
- Unmodified opinion
- Modified report
- Unmodified opinion + Emphasis of matter paragraph and/or Other matter paragraph
- Modified opinion
- Qualified opinion
- Adverse opinion
The explanation given above is basically given by teachers and professionals to students and juniors etc to understand how changes are made in audit report and their reasons as at initial stages of learning, modified opinion and modified report might mix up and any change in audit report might be confused with modified opinion. So such explanations help in understanding and clearing out doubts.
But talking strictly in content of International Standards on Auditing, ISAs has never used a language where modified report and modified opinion is used to mean two different things, although it would help. Whenever a modification is discussed in standards, it always refers to modification in opinion. In other words, there is no such thing as modified report without modification in opinion. I must emphasize again that standards do not use the term of modification in relation to report. It is always found connected with opinion. Therefore, standard does not back such explanation.
But, standards has to be strict in using the terminologies. This is what clarity projects are about. But standards do not keep us to explain things in a way which make more sense and help us understand better 🙂
Lastly, if this note makes no sense then don’t be confused and ignore this note completely and take the explanation given above.