Annual Audit Manual
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8024 Comparative financial statements
Apr-2018
In This Section
Referencing comparative financial statements in the audit report
Opinion on prior period financial statements different from previous opinion
Prior year financial statements were audited by a predecessor auditor
Overview
This topic explains:
- How comparative financial statements are referenced in the audit report
- How to address a difference in our current year report on the prior year period financial statements and the previous opinion
- The impact on our audit report when prior year was audited by a predecessor auditor
- The impact on the audit report when the prior year comparatives are unaudited
CAS Requirement
When comparative financial statements are presented, the auditor’s opinion shall refer to each period for which financial statements are presented and on which an audit opinion is expressed (CAS 710.15).
CAS Guidance
Because the auditor’s report on comparative financial statements applies to the financial statements for each of the periods presented, the auditor may express a qualified opinion or an adverse opinion, disclaim an opinion, or include an Emphasis of Matter paragraph with respect to one or more periods, while expressing a different auditor’s opinion on the financial statements of the other period (CAS 710.A9).
OAG Guidance
Refer to CAS 710 for guidance before providing your auditor’s report to Audit Services for review.
CAS Requirement
When reporting on prior period financial statements in connection with the current period’s audit, if the auditor’s opinion on such prior period financial statements differs from the opinion the auditor previously expressed, the auditor shall disclose the substantive reasons for the different opinion in an Other Matter paragraph in accordance with CAS 706 (CAS 710.16).
CAS Guidance
When reporting on the prior period financial statements in connection with the current period’s audit, the opinion expressed on the prior period financial statements may be different from the opinion previously expressed if the auditor becomes aware of circumstances or events that materially affect the financial statements of a prior period during the course of the audit of the current period. In some jurisdictions, the auditor may have additional reporting responsibilities designed to prevent future reliance on the auditor’s previously issued report on the prior period financial statements (CAS 710.A11).
CAS Requirement
If the financial statements of the prior period were audited by a predecessor auditor, in addition to expressing an opinion on the current period’s financial statements, the auditor shall state in an Other Matter paragraph (CAS 710.17):
(a) That the financial statements of the prior period were audited by a 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,
unless the predecessor auditor’s report on the prior period’s financial statements is reissued with the financial statements.
If the auditor concludes that a material misstatement exists that affects the prior period financial statements on which the predecessor auditor had previously reported without modification, the auditor shall communicate the misstatement with the appropriate level of management and, unless all of those charged with governance are involved in managing the entity, those charged with governance and request that the predecessor auditor be informed. If the prior period financial statements are amended, and the predecessor auditor agrees to issue a new auditor’s report on the amended financial statements of the prior period, the auditor shall report only on the current period (CAS 710.18).
CAS Guidance
The predecessor auditor may be unable or unwilling to reissue the auditor’s report on the prior period financial statements. An Other Matter paragraph of the auditor’s report may indicate that the predecessor auditor reported on the financial statements of the prior period before amendment. In addition, if the auditor is engaged to audit and obtains sufficient appropriate audit evidence to be satisfied as to the appropriateness of the amendment, the auditor’s report may also include the following paragraph (CAS 710.A12):
As part of our audit of the 20X2 financial statements, we also audited the adjustments described in Note X that were applied to amend the 20X1 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 20X1 financial statements of the company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 20X1 financial statements taken as a whole.
CAS Requirement
If the prior period financial statements were not audited, the auditor shall state in an Other Matter paragraph that the comparative financial statements 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 710.19).
OAG Guidance
If the prior year financial statements were not audited, our report must have a paragraph disclosing this fact. However, in such cases, we must still obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially impact the financial results for the period we are auditing.