Annual Audit Manual
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8023 Corresponding figures
Jun-2021
In This Section
Referencing corresponding figures in the audit report
Impact of a modified opinion in prior year -we were the auditors
Prior year financial statements were audited by a predecessor auditor
Overview
This topic explains:
- How corresponding figures are referenced in the audit report;
- The impact of a modified opinion in the prior year on the current year report in respect of comparative information;
- Referring to corresponding figures in the audit report when the prior year comparatives are unaudited.
CAS Requirement
When corresponding figures are presented, the auditor's opinion shall not refer to the corresponding figures except in the circumstances described in paragraphs 11, 12, and 14 (CAS 710.10).
CAS Guidance
The auditor's opinion does not refer to the corresponding figures because the auditor's opinion is on the current period financial statements as a whole, including the corresponding figures (CAS 710.A2).
OAG Guidance
Background
Two approaches to the auditor's reporting responsibilities are described in CAS 710 - the corresponding figures approach and the comparative financial statements approach.
In Canada, one or the other of these approaches would be used depending on the circumstances. The different approaches result in a different content to the auditor's report: In a corresponding figures approach to reporting, the auditor's report only addresses the current year, unless there was a modification in the prior year auditor's report, which remains unresolved, or the prior year was audited by other auditors or not audited at all. In a comparative financial statement approach to reporting, the auditor’s report addresses all comparative periods.
Frequently asked questions:
1. How do I know if my client's financial statements are corresponding figures or comparative financial statements?
The Glossary of Terms in the CPA Canada Handbook – Assurance defines the terms “comparative information”, “corresponding figures” and “comparative financial statements” as follows:
- Comparative information – The amounts and disclosures included in the financial statements in respect of one or more prior periods in accordance with the applicable financial reporting framework.
- Corresponding figures – Comparative information where amounts and other disclosures for the prior period are included as an integral part of the current period financial statements, and are intended to be read only in relation to the amounts and other disclosures relating to the current period (referred to as “current period figures”). The level of detail presented in the corresponding amounts and disclosures is dictated primarily by its relevance to the current period figures.
- Comparative financial statements – Comparative information where amounts and other disclosures for the prior period are included for comparison with the financial statements of the current period but, if audited, are referred to in the auditor’s opinion. The level of information included in those comparative financial statements is comparable with that of the financial statements of the current period.
Most financial reporting frameworks require that comparative information be presented. However, a financial reporting framework may not indicate whether the comparative information should be in the form of corresponding figures or comparative financial statements.
To determine whether comparative information should be presented in the form of corresponding figures or comparative financial statements, engagement teams need to consider the requirements of laws and regulations and what you have been engaged to do. For example, Canadian securities law requires that for a Canadian reporting issuer the auditor reports on both the current and prior year - therefore, for a Canadian reporting issuer, engagement teams have to apply the comparative financial statements approach to reporting.
2. OAG audited the prior year financial statements. Should we refer to the prior year in our auditor's report for the current year audit?
Only if engaged this year to audit both years (in other words, you are in the comparative financial statements approach to reporting).
In the corresponding figures approach, CAS 710 paragraph 10 says the auditor's report shall not refer to the corresponding figures (except if (1) the prior year auditor's report included a qualification, disclaimer of opinion or adverse opinion, and the matter which gave rise to the modification is unresolved, (2) the prior period financial statements were audited by another auditor or (3) the prior year financial statements were never audited). Normally, without a reference to the prior year in the report, it is "understood" that we were the auditor of the prior period. If a reference to the prior year is required in our report, this reference is made in the basis for qualification or in an other matter paragraph. Teams should refer to CAS 710 paragraphs 11-14 in these cases.
3. But CAS 710 paragraph 6(c) says that amounts and disclosures for the prior period that are included for comparison with the financial statements of the current period, if audited, are referred to in the auditor's opinion. Doesn't this mean that if we audited the prior year we are in the comparative financial statements approach automatically and therefore need to refer to the prior year in the auditor's report?
No. That paragraph is saying that we need to refer to the prior year in the auditor's report if we are in the comparative financial statements approach AND the prior year is audited. However, the mere fact the prior year is audited doesn't require us to apply the comparative financial statement approach.
CAS Requirement
If the auditor's report on the prior period, as previously issued, included a qualified opinion, a disclaimer of opinion, or an adverse opinion and the matter which gave rise to the modification is unresolved, the auditor shall modify the auditor's opinion on the current period's financial statements. In the Basis for Modification paragraph in the auditor's report, the auditor shall either (CAS 710.11):
(a) Refer to both the current period's figures and the corresponding figures in the description of the matter giving rise to the modification when the effects or possible effects of the matter on the current period's figures are material; or
(b) In other cases, explain that the audit opinion has been modified because of the effects or possible effects of the unresolved matter on the comparability of the current period's figures and the corresponding figures.
If the auditor obtains audit evidence that a material misstatement exists in the prior period financial statements on which an unmodified opinion has been previously issued, and the corresponding figures have not been properly restated or appropriate disclosures have not been made, the auditor shall express a qualified opinion or an adverse opinion in the auditor's report on the current period financial statements, modified with respect to the corresponding figures included therein (CAS 710.12).
CAS Guidance
When the auditor's report on the prior period, as previously issued, included a qualified opinion, a disclaimer of opinion, or an adverse opinion and the matter which gave rise to the modified opinion is resolved and properly accounted for or disclosed in the financial statements in accordance with the applicable financial reporting framework, the auditor's opinion on the current period need not refer to the previous modification (CAS 710.A3).
When the auditor's opinion on the prior period, as previously expressed, was modified, the unresolved matter that gave rise to the modification may not be relevant to the current period figures. Nevertheless, a qualified opinion, a disclaimer of opinion, or an adverse opinion (as applicable) may be required on the current period's financial statements because of the effects or possible effects of the unresolved matter on the comparability of the current and corresponding figures (CAS 710.A4).
When the prior period financial statements that are misstated have not been amended and an auditor's report has not been reissued, but the corresponding figures have been properly restated or appropriate disclosures have been made in the current period financial statements, the auditor's report may include an Emphasis of Matter paragraph describing the circumstances and referring to, where relevant, disclosures that fully describe the matter that can be found in the financial statements (see CAS 706) (CAS 710.A6).
OAG Guidance
Refer to CAS 710 for guidance before providing the draft auditor’s report to Audit Services for review.
CAS Requirement
If the financial statements of the prior period were audited by a predecessor auditor and the auditor is not prohibited by law or regulation from referring to the predecessor auditor's report on the corresponding figures and decides to do so, the auditor shall state in an Other Matter paragraph in the auditor's report (CAS 710.13):
(a) That the financial statements of the prior period were audited by the predecessor auditor;
(b) The type of opinion expressed by the predecessor auditor and, if the opinion was modified, the reasons therefore; and
(c) The date of that report.
CAS Guidance
An illustrative example of the auditor's report if the prior period financial statements were audited by a predecessor auditor and the auditor is not prohibited by law or regulation from referring to the predecessor auditor's report on the corresponding figures is contained in Illustration 3 of the Appendix (CAS 710.A7).
Related Guidance
Refer to CAS 710 for additional guidance on application of the CAS and illustrative examples.
CAS Requirement
If the prior period financial statements were not audited, the auditor shall state in an Other Matter paragraph in the auditor's report that the corresponding figures are unaudited. Such a statement does not, however, relieve the auditor of the requirement to obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the current period's financial statements (CAS 710.14).
Related Guidance
Refer to CAS 710 for additional guidance on application of the CAS.