BSA 700: The Auditor’s Report on Financial Statements
Prepared By Abdullah-Al- Mamun
The auditor should review and assess the conclusions drawn from the audit evidence as obtained as the basis for the expression of an opinion on the financial statements.
Basic Elements of the Auditor’s Report
The auditor’s report includes the following basic elements ordinarily in the following layout:
c) Opening or Introductory Paragraph-
i) Identification of the Financial Statements audited ii) A statement of the responsibility of the entity’s management and the responsibility of the auditor.
d) Scope Paragraph (describing the nature of the audit)-
i) A reference to the BSAs or relevant national standards or practices ii) A description of the work the auditor performed.
e) Opinion Paragraph containing-
i) Reference to the financial reporting framework used to prepare the financial statements (including identifying the country of origin of the financial reporting framework when the framework used is not Bangladesh Accounting Standards); and ii) An expression of opinion on the financial statements.
f) Date of the report
g) Auditor’s Address and
h) Auditor’s Signature.
The auditor’s report should have an appropriate title. It may be appropriate to use the term “Independent Auditor” in the title to distinguish the auditor’s report from the report that might be issued by others such as officers of the entity, the board of directors, or from the reports of other auditors who may not have to abide by the same ethical requirements as the independent auditor.
The auditor’s report should be appropriately addressed as required by the circumstances of the engagement and local regulations. The report is ordinarily addressed either to the shareholders or the board of directors of the entity whose financial statements are being audited.
Opening or Introductory Paragraph
The auditor’s report should identify the financial statements of the entity that have been audited, including the date of and period covered by the financial statements.
The report should include a statement that the financial statements are the responsibility of the entity’s management and a statement that the responsibility of the auditor is to express an opinion on the financial statements based on the audit.
An illustration of these matters in an opening (introductory) paragraph is:
“We have audited the accompanying balance sheet of the ABC Company as of December 31, 20XX and the related profit and Loss account cash flows for the year then ended. The Preparation of these financial statements is to express an independent opinion on these financial statements based on our audit.”
The auditor’s report should describe the scope of the audit by stating that the audit was conducted in accordance with BSAs. Scope refers to the auditor’s ability to perform audit procedures deemed necessary in the circumstances. The readers need this as an assurance that the audit has been carried out in accordance with established standards or practices.
The report should include a statement that the audit was planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatements.
The auditor’s report should describe the audit as including:
a) Examining, on a test basis, evidence to support the financial statement amounts and disclosures; b) Assessing the accounting principles used in the preparation of the financial statements; c) Assessing the significant estimates made by management in the preparation of the financial statements; and d) Evaluating the overall financial statement presentation.
The report should include a statement by the auditor that the audit provides a reasonable basis for the opinion.
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