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THE INDEPENDENT AUDITOR’S
REPORT – PSA 700 (Revised and
Redrafted)
• The auditor’s report is the final product
of any audit process that communicates
the auditor’s findings to interested
users. It expresses an opinion on the
degree of correspondence between
information contained in the financial
statements and the established criteria
in the auditor’s procedures.
• The requirements for issuing audit
report are set out in PSA 200
(Objectives and General Principles
Governing an Audit of Financial
Statements and in PSA 700 par. 1-3.
Basic Elements of the Auditor’s
Standard Report (New Standard – PSA
700 Revised & Redrafted)
I. Title
II. Addressee
III. Opinion Paragraph
IV. Basis for Opinion
V. Going Concern
VI. Key Audit Matters
VII. Other Information
VIII. Management Responsibility for
the Financial Statements
IX. Auditor’s Responsibility for the
Audit of Financial Statements
X. Other Reporting Responsibilities
XI. Name of Engagement Partner
XII. Signature of Partner
XIII. Address of the Partner
XIV. Date of Auditor’s Report
1. Title – The report must be titled
“INDEPENDENT AUDITOR’S REPORT.” It
affirms that the auditor has met all of
the relevant ethical requirements
regarding independence. This
distinguishes the report from reports
issued by others.
2. Addressee – addressed to the users of
the financial statements:
• Incorporated Entity - Board of
Directors and/or Stockholders
• Partnership - The Firm or the
Partners of the Firm.
• Unincorporated Joint Venture –
Participants or Venturers
• Sole Proprietorship – Sole
Proprietor
• Outside Party – The Engaging
Party
3. Opinion Section:
• Significant accounting policies
and explanatory notes should
be referred to
• State that the financial
statements have been audited
• Financial statements audited
• Name of the entity and the
period covered during the audit
• Opinion
4. Basis for Opinion:
• State that the audit was
conducted in accordance with
PSAs
• Referral to the Auditor’s
Responsibility Section
• Independence of the Auditor
• Compliance with the Code of
Ethics
• Evidence (Sufficient Appropriate
evidence was gathered)
5. Going Concern – necessary when the
going concern issue becomes a
significant risk that comes to the
attention of the auditor that needs an
emphasis.
• If there is no material
uncertainties or going concern
issue, in responsibilities of
Management & Directors for FS
section to include a statement
stating that there is no existing
GC issue.
• The same also in the auditor’s
responsibility section to include
a paragraph on going concern,
stating that there is no going
concern issue.
• If there is material uncertainty
or there is going concern issue
where disclosures are adequate,
the auditor should include in the
audit report a separate section
under the heading “Material
Uncertainty Related to Going
Concern” drawing attention to
those disclosures. An
unqualified opinion is
appropriate in this
circumstance.
• If there is material uncertainty
or there is going concern issue
where disclosures are
inadequate, the auditor shall
express a qualified or adverse
opinion.
6. Key Audit Matters (KAM) – these are
matters of governance interest which
includes:
➢ Items regarded as Key Audit Matters:
• Areas identified as significant risks or
areas with high Risk of Material
Misstatement (ROMM);
• Areas in which the auditor
encountered significant difficulty
during the course of the audit;
• Areas which requires significant
management judgements and
estimates;
• Circumstances that required
auditor has determined that there is
no KAM.
• Emphasis of Matter and Other Matter
paragraphs are retained. However,
such paragraphs cannot be used as
substitute for communicating a KAM.
Illustrative KAM Example on
Revenue Recognition
Why the Matter was Determined to be a
KAM:
• “The amount of revenue and profit
recognized in the year on the sale of
computer software bundled with the
necessary training service for the use of such
asset is dependent on the appropriate
assessment of whether or not required
training services is linked to or separate from
the contract for sale of the computer
software. As the commercial arrangements
can be complex, significant judgement is
applied in selecting the accounting basis in
each case. In our view, revenue recognition
is significant to our audit as the Company
