Auditor’s Report

Mohammad Salahuddin Chowdhury, FCA

University of Dhaka
 Rights/powers of auditors and duties
213. Power and duties of auditors:- (1) Every auditor of a company shall have a right of access at all times to the
books and accounts and vouchers of the company, whether kept at the head office of the company or elsewhere and
shall be entitled to require from the officers of the company such information and explanation as the auditor may
think necessary for the performance of his duties as auditor.
(2) Without prejudice to the provisions of sub-section (1), the auditor shall, in particular inquire into following
namely:-
(a) Whether loans and advances made by the company on the basis of security have been properly secured and
whether the terms on which they have been made are not prejudicial to the interests of the company or its
members:
(b) Whether transactions of the company which are represented merely as book-entries are prejudicial to the
interests of the company;
(c) where the company is not an investment company or a banking company, whether so much of the assets of
thecompany as consist of shares, debentures and other seeurities, have been sold at a price less than at which
they were purchased by the company;
(d) whether loans and advances made by the company have been shown as deposits;
(e) whether personal expenses have been charged to revenue account;
(f) where it is stated in the books and paper of the company that any shares have ben allotted for cash, whether
cash has actually been received in respect of such allotment, and if no cash has actually been so received,
whether the position as stated in the account books and the balance sheet is correct, regular and not
misleading.
 Rights/powers of auditors and duties
(3) The auditor shall make a report to be presented in the annual general meeting of he company on the accounts,
Examined by him, and on every balance sheet and profit and loss account and on every other document declared by
this Act to be part of or annexed to the balance sheet or profit and loss accounts which are laid before the company
in general meeting during his tenure of office and the report shall state whether, in his opinion and to the best of his
information and according to the explanation given to him, the said accounts give the information required by this
Act in the manner so required and give a
true and fair view-
(a) in the case of the balance sheet, of the state of the company's affairs as at the end of its financial year;
(b) in the case of the profit and loss account, of the profit or loss for its financial year.
(4) The auditors report shall also state-
(a) whether he has obtained all the information and explanation which to the best of his knowledge and belief
were necessary for the purposes of his audit;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as
appears from his examination of those books and proper returns adequate for the purposes of his audit have
been received from branches not visited by him;
(c) whether the company's balance sheet and profit and loss account dealt with by the report are in agreement
with the books of account and returns.
 Rights/powers of auditors and duties
217. Right of auditor to attend general meeting-All notices of an other communications relating to any
general meeting of a company which any member of the company is entitled to have sent to him shall
also be forwarded to the auditor of the company, and the auditor shall be entitled to attend any
general meeting and to be heard at any general meeting which he attends on any part of the business
which concerns him as auditor.
 Auditor’s report

BSA 700 deals with the form and content of the auditor’s report issued as a result
of an audit of financial statements.

BSA 705 and BSA 706 deal with how the form and content of the auditor’s
report are affected when the auditor expresses a modified opinion or
includes an Emphasis of Matter paragraph or an Other Matter paragraph in the
auditor’s report.

Unmodified opinion – The opinion expressed by the auditor when the auditor
concludes that the financial statements are prepared, in all material respects, in
accordance with the applicable financial reporting framework.
 Auditor’s report

Form of Opinion
The auditor shall express an unmodified opinion when the auditor concludes
that the financial statements are prepared, in all material respects, in accordance
with the applicable financial reporting framework.

If the auditor:
(a) concludes that, based on the audit evidence obtained, the financial
statements as a whole are not free from material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the
financial statements as a whole are free from material misstatement,

the auditor shall modify the opinion in the auditor’s report in accordance with
BSA 705.
 Auditor’s report

Contents of Auditor’s Report

• Title
• Addressee
• Introductory Paragraph
• Management’s Responsibility for the Financial Statements
• Auditor’s Responsibility
• Auditor’s Opinion
• Signature of the Auditor
• Date of the Auditor’s Report
 Auditor’s report

Circumstances When a Modification to the Auditor’s Opinion Is Required

The auditor shall modify the opinion in the auditor’s report when:
• (a) The auditor concludes that, based on the audit evidence obtained, the
financial statements as a whole are not free from material misstatement; or

• (b) The auditor is unable to obtain sufficient appropriate audit evidence to

conclude that the financial statements as a whole are free from material
misstatement.
 Auditor’s report
Determining the Type of Modification to the Auditor’s Opinion
• Qualified Opinion
The auditor shall express a qualified opinion when:
(a) The auditor, having obtained sufficient appropriate audit evidence,
concludes that misstatements, individually or in the aggregate, are material,
but not pervasive, to the financial statements; or
(b) The auditor is unable to obtain sufficient appropriate audit evidence on
which to base the opinion, but the auditor concludes that the possible
effects on the financial statements of undetected misstatements, if any,
could be material but not pervasive.
• Adverse Opinion
The auditor shall express an adverse opinion when the auditor, having obtained
sufficient appropriate audit evidence, concludes that misstatements, individually
or in the aggregate, are both material and pervasive to the financial statements.
 Auditor’s report
Determining the Type of Modification to the Auditor’s Opinion

Disclaimer of Opinion
The auditor shall disclaim an opinion when the auditor is unable to obtain
sufficient appropriate audit evidence on which to base the opinion, and the
auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be both material and pervasive.

The auditor shall disclaim an opinion when, in extremely rare circumstances

involving multiple uncertainties, the auditor concludes that, notwithstanding
having obtained sufficient appropriate audit evidence regarding each of the
individual uncertainties, it is not possible to form an opinion on the financial
statements due to the potential interaction of the uncertainties and their
possible cumulative effect on the financial statements.
 Auditor’s report

Circumstances When a Modification to the Auditor’s Opinion Is Required

Pervasive – A term used, in the context of misstatements, to describe
the effects on the financial statements of misstatements or the possible effects
on the financial statements of misstatements, if any, that are undetected due to
an inability to obtain sufficient appropriate audit evidence. Pervasive effects on
the financial statements are those that, in the auditor’s judgment:
(i) Are not confined to specific elements, accounts or items of the financial
statements;
(ii) If so confined, represent or could represent a substantial proportion of the
financial statements; or
(iii) In relation to disclosures, are fundamental to users’ understanding
of the financial statements.
 Auditor’s report
Circumstances When a Modification to the Auditor’s Opinion Is Required

BSA 450 defines a misstatement as a difference between the amount,

classification, presentation, or disclosure of a reported financial statement item
and the amount, classification, presentation, or disclosure that is required for
the item to be in accordance with the applicable financial reporting framework.

Material misstatement of the financial statements may arise in relation to:

(a) The appropriateness of the selected accounting policies;
(b) The application of the selected accounting policies; or
(c) The appropriateness or adequacy of disclosures in the financial statements.
Auditor’s report
 Auditor’s report
Illustration of auditor’s report
a. An auditor’s report containing a qualified opinion due to a material
misstatement of the financial statements.
Inventories are misstated. The misstatement is deemed to be material
but not pervasive to the financial statements.

b. An auditor’s report containing an adverse opinion due to a material

misstatement of the financial statements.
The financial statements are materially misstated due to the nonconsolidation
of a subsidiary. The material misstatement is deemed to be pervasive to the
financial statements. The effects of the misstatement on the financial
statements have not been determined because it was not practicable to do so.
 Auditor’s report
Illustration of auditor’s report
c. An auditor’s report containing a qualified opinion due to the auditor’s
inability to obtain sufficient appropriate audit evidence.
The auditor was unable to obtain sufficient appropriate audit evidence regarding an investment in a
foreign affiliate. The possible effects of the inability to obtain sufficient appropriate audit evidence
are deemed to be material but not pervasive to the financial statements.

d. An auditor’s report containing a disclaimer of opinion due to the auditor’s

inability to obtain sufficient appropriate audit evidence about a single element of
the financial statements.
The auditor was unable to obtain sufficient appropriate audit evidence about a single element of
the financial statements. That is, the auditor was also unable to obtain audit evidence about the
financial information of a joint venture investment that represents over 90% of the company’s net
assets. The possible effects of this inability to obtain sufficient appropriate audit evidence are
deemed to be both material and pervasive to the financial statements.
Any Questions ?