Annual Audit Manual
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8037 Reporting and documentation
Apr-2018
In This Section
Reporting implications—Qualified or adverse opinion
Overview
This topic explains:
- Illustrative statements
- Reporting implications—Qualified or adverse opinion
- Reporting prescribed by law or regulation
- Documentation
CAS Requirement
The auditor’s report shall include a separate section with a heading "Other Information", or other appropriate heading, when, at the date of the auditor’s report (CAS 720.21):
(a) For an audit of financial statements of a listed entity, the auditor has obtained, or expects to obtain, the other information; or
(b) For an audit of financial statements of an entity other than a listed entity, the auditor has obtained some or all of the other information.
When the auditor’s report is required to include an Other Information section in accordance with paragraph 21, this section shall include (CAS 720.22):
(a) A statement that management is responsible for the other information;
(b) An identification of:
(i) Other information, if any, obtained by the auditor prior to the date of the auditor’s report; and
(ii) For an audit of financial statements of a listed entity, other information, if any, expected to be obtained after the date of the auditor’s report;
(c) A statement that the auditor’s opinion does not cover the other information and, accordingly, that the auditor does not express (or will not express) an audit opinion or any form of assurance conclusion thereon;
(d) A description of the auditor’s responsibilities relating to reading, considering and reporting on other information as required by this CAS; and
(e) When other information has been obtained prior to the date of the auditor’s report, either:
(i) A statement that the auditor has nothing to report; or
(ii) If the auditor has concluded that there is an uncorrected material misstatement of the other information, a statement that describes the uncorrected material misstatement of the other information.
CAS Guidance
For an audit of financial statements of an entity other than a listed entity, the auditor may consider that the identification in the auditor’s report of other information that the auditor expects to obtain after the date of the auditor’s report would be appropriate in order to provide additional transparency about the other information that is subject to the auditor’s responsibilities under this CAS. The auditor may consider it appropriate to do so, for example, when management is able to represent to the auditor that such other information will be issued after the date of the auditor’s report (CAS 720.A52).
Illustrative examples of the "Other Information" section of the auditor’s report are included in Appendix 2 (CAS 720.A53).
CAS Requirement
When the auditor expresses a qualified or adverse opinion in accordance with CAS 705 the auditor shall consider the implications of the matter giving rise to the modification of opinion for the statement required in paragraph 22(e) (CAS 720.23).
CAS Guidance
A qualified or adverse auditor’s opinion on the financial statements may not have an impact on the statement required by paragraph 22(e) if the matter in respect of which the auditor’s opinion has been modified is not included or otherwise addressed in the other information and the matter does not affect any part of the other information. For example, a qualified opinion on the financial statements because of non-disclosure of directors’ remuneration as required by the applicable financial reporting framework may have no implications for the reporting required under this CAS. In other circumstances, there may be implications for such reporting as described in paragraphs A55-A58 (CAS 720.A54).
Qualified Opinion Due to a Material Misstatement in the Financial Statements
In circumstances when the auditor’s opinion is qualified, consideration may be given as to whether the other information is also materially misstated for the same matter as, or a related matter to, the matter giving rise to the qualified opinion on the financial statements (CAS 720.A55).
Qualified Opinion Due to Limitation of Scope
When there is a limitation of scope with respect to a material item in the financial statements, the auditor will not have obtained sufficient appropriate audit evidence about that matter. In these circumstances, the auditor may be unable to conclude whether or not the amounts or other items in the other information related to this matter result in a material misstatement of the other information. Accordingly, the auditor may need to modify the statement required by paragraph 22(e) to refer to the auditor’s inability to consider management’s description of the matter in the other information in respect of which the auditor’s opinion on the financial statements has been qualified as explained in the Basis for Qualified Opinion paragraph. The auditor is nevertheless required to report any other uncorrected material misstatements of the other information that have been identified (CAS 720.A56).
Adverse Opinion
An adverse opinion on the financial statements relating to a specific matter(s) described in the Basis for Adverse Opinion paragraph does not justify the omission of reporting of material misstatements of the other information that the auditor has identified in the auditor’s report in accordance with paragraph 22(e)(ii). When an adverse opinion has been expressed on the financial statements, the auditor may need to appropriately modify the statement required by paragraph 22(e) for example, to indicate that amounts or items in the other information is materially misstated for the same matter as, or a related matter to, the matter giving rise to the adverse opinion on the financial statements (CAS 720.A57).
Disclaimer of Opinion
When the auditor disclaims an opinion on the financial statements, providing further details about the audit, including a section to address other information may overshadow the disclaimer of opinion on the financial statements as a whole. Accordingly, in those circumstances, as required by CAS 705, the auditor’s report does not include a section addressing the reporting requirements under this CAS (CAS 720.A58).
CAS Requirement
If the auditor is required by law or regulation of a specific jurisdiction to refer to the other information in the auditor’s report using a specific layout or wording, the auditor’s report shall refer to Canadian generally accepted auditing standards only if the auditor’s report includes, at a minimum (CAS 720.24)
(a) Identification of the other information obtained by the auditor prior to the date of the auditor’s report;
(b) A description of the auditor’s responsibilities with respect to the other information; and
(c) An explicit statement addressing the outcome of the auditor’s work for this purpose.
CAS Guidance
CAS 200 explains that the auditor may be required to comply with legal or regulatory requirements in addition to the CASs. Where this is the case, the auditor may be obliged to use a specific layout or wording in the auditor’s report that differs from that described in this CAS. Consistency in the auditor’s report, when the audit has been conducted in accordance with CASs, promotes credibility in the global marketplace by making more readily identifiable those audits that have been conducted in accordance with globally recognized standards. When the differences between the legal or regulatory requirements to report with respect to the other information and this CAS relate only to the layout and wording in the auditor’s report and, at a minimum, each of the elements identified in paragraph 24 is included in the auditor’s report, the auditor’s report may refer to Canadian generally accepted auditing standards. Accordingly, in such circumstances the auditor is considered to have complied with the requirements of this CAS, even when the layout and wording used in the auditor’s report are specified by legal or regulatory reporting requirements (CAS 720.A59).
CAS Requirement
In addressing the requirements of CAS 230 4 as it applies to this CAS, the auditor shall include in the audit documentation (CAS 720.25):
(a) Documentation of the procedures performed under this CAS; and
(b) The final version of the other information on which the auditor has performed the work required under this CAS.
OAG Guidance
Include the final version of the other information in the working papers.