ISA 700 – Forming an Opinion and Reporting on Financial Statements

Part 1: Introduction + Executive summary
Part 2: Expressing auditor’s opinion, ISA 700 objective
Part 3: Forming an opinion, Forms of opinion

Part 4: Contents of auditor’s report with unmodified opinion, Supplementary information with financial statements

Read ISA 700 Summary Online  ISA 700 Test

5 Contents of Auditor’s report with unmodified opinion

Auditor expresses his opinion on entity’s financial statements in the form of a written report. Oral expression cannot substitute a written report.

As auditor’s expression enhances the credibility of financial statements therefore auditor’s report follows a certain format and comprises of specific elements and content.

Local applicable laws and regulations may require auditor to change the content of auditor’s. However, as per ISA 700 auditor’s report has following elements:

5.1 Title

Auditor’s report must bear clear title that indicates that it is a report from an auditor. For example; “Independent Auditor’s Report”. Inclusion of title supplements the fact that it is a report from an auditor who is qualified as per code of ethics and applicable laws and regulations.

5.2 Addressee

Addressee are the audience to whom report is meant to be served. For example; shareholders. But addressee may vary from situation to situation and must be mentioned in the report.

5.3 Introductory paragraph

This paragraph conveys some basic yet important facts regarding financial statements which are:

  1. Name of the entity whose financial statements are audited
  2. Clear statement that financial statements have been audited
  3. Title of financial statements that comprise complete set of financial statements
  4. Summary of important policies and other explanatory information which may or may not form part of complete set of financial statements.
  5. Clearly mentioning the time period covered by the financial statements that are audited

5.4 Management’s responsibility for the financial statements

Auditor is required to include this section with the heading in auditor’s report in which he details the responsibility of those who are duty bound to prepare financial statements to whom auditor may refer to as management but he is allowed to use any term that best describes the responsible personnel.

While describing the responsibility of management (or also those charged with governance also where appropriate), auditor is required to describe that is management who is responsible to prepare financial statements and to implement internal control system to assist management in preparing financial statements that are free from material misstatements.

5.5 Auditor’s responsibility

This section which is included with the same heading in the auditor’s report describes the responsibility of auditor is to express an opinion the financial statements prepared by the management.

Auditor shall describe that auditor complied with applicable ethical requirements and auditing standards to obtain reasonable assurance.

While describing what auditor’s responsibility includes, he must clarify that:

  1. Audit is application of procedures to obtain evidence about amounts and information disclosed in the financial statements
  2. The selection of procedures is a result of auditor’s judgment considering the circumstances of engagement
  3. Audit includes evaluation of:
    1. Appropriateness of policies selected and applied
    2. Reasonableness of accounting estimates
    3. Overall presentation of financial statements

The auditor’s report must also include the statement if auditor believes that as a result of audit procedures applied, sufficient appropriate audit evidence has been obtained and the same can be used as basis for auditor’s opinion.

5.6 Auditor’s opinion

Auditor’s report must include this section with the same heading and while expressing unmodified opinion auditor may use any of the following phrases:

The financial statements present fairly, in all material respects, [………………..] in accordance with [applicable financial reporting framework e.g. International Accounting Standards]


The financial statements give true and fair view of [………….] in accordance with [applicable financial reporting framework e.g. International Accounting Standards]

To express an unmodified opinion as per International Auditing Standards, financial reporting framework does not necessarily have to be International Financial Reporting Standards. It can be any as per local laws and regulations.

5.7 Other reporting responsibilities

In some jurisdictions auditor is required to express opinion on additional matters as well beside financial statements. For example internal control system. If such is the case, then opinion on such matters will expressed after the opinion on financial statements in this section.

5.8 Signature of the auditor

Auditor’s report is required to be signed by the auditor. The signature may be the name of the audit firm or signatures of the auditor or both. In some jurisdictions auditor may have to disclose:

  • Accountancy designation of auditor
  • Auditor or firm has been licensed by the appropriate authority

5.9 Date of auditor’s report

It must include the data evidencing when auditor has issued it. However, this cannot be dated earlier than:

  • Sufficient appropriate evidence has been obtained by the auditor
  • Financial statements are completely prepared as asserted by those responsible for preparing financial statements

5.10 Auditor’s address

This is the address where auditor practices

6 Supplementary information with Financial Statements

If supplementary information has been included with the financial statements by the management then auditor shall evaluate if such information is consistent with the financial statements and has been differentiated from the audited financial statements.

If management refuses to correct the presentation of such supplementary information that may confuse the user and take it as part of financial statements then auditor shall clearly state that such supplementary information is not audited.