There is flexibility in the order of the remaining sections of the Auditor’s Report. The Australian Auditing Standards provide guidance on the order with the overall principle being to give prominence to the matters of most importance. The order of content in ASA 700 Forming an Opinion and Reporting on a Financial Report and the illustrative Auditor’s Reports are structured to achieve this, and it is advisable that this order is followed. Refer to question 5 for further details.
The auditor’s opinion no longer includes an opinion on compliance with IFRS. This requirement was considered redundant in view of changes to the Corporations Act 2001 which now requires that the director’s declaration includes a statement of compliance with IFRS .
Key Audit Matters (KAMs)
- Auditors of listed entities now include information in respect of those matters which in their judgement, were of most significance in the audit of the financial report in the current year.
- Auditors of non-listed entities can elect to include KAMs but are not required to do so.
Refer to questions 8-16 for further details.
More detail is provided on the director’s and auditor’s responsibilities in respect to other information, and on the status of the auditor’s consideration of other information, at the date of the Auditor’s Report. Other information is financial and non-financial information included in the Annual Report (excluding the financial report and Auditor’s Report thereon). This is included in the Auditor’s Report under a heading ‘Other Information’ or other appropriate heading.
For listed entities, the Auditor’s Report now details the other information received and information that has not yet been received at the date of the Auditor’s Report.
For non-listed entities, the Auditor’s Report details the other information received at the date of the Auditor’s Report. There is no requirement to detail other information not received at the date of the Auditor’s Report.
For non-listed entities, if at the date of the Auditor’s Report no other information has been received, the Auditor’s Report does not include an ‘Other Information’ section. As the other information includes the Director’s report, it is unlikely to be common that some other information has not been received at the date of the Auditor’s Report.
Refer to questions 17-19 for further details.
This is reported using the heading ‘Responsibilities of Management  for the Financial Report’ (or for Corporations Act 2001 entities this would refer to ‘Directors’).
There are additional details on the responsibility of management/the directors for assessing whether the use of the going concern basis of accounting is appropriate, and whether any relevant disclosures are adequate. These responsibilities are not new, but are now described in the Auditor’s Report.
The auditor’s responsibilities section has been expanded to provide more information about the key features of an audit.
This section is no longer ‘boiler plate’ across all audits and is amended depending on whether or not:
- the entity is a single entity or a group
- the entity is a listed entity or non-listed entity
- the auditor is communicating KAMs
- the entity uses a fair presentation or compliance framework in the financial report
- the audit is a group audit
- the auditor is issuing a qualified opinion.
New options are now available to present parts of the auditor’s responsibility section :
- within the body of the Auditor’s Report (as is current practice)
- within an appendix to the Auditor’s Report with a reference in the Auditor’s Report to the appendix
- or by including a reference within the Auditor’s Report to the relevant page on the Australian Auditing and Assurance Standards Board (AUASB) website (www.auasb.gov.au/Home.aspx).
ASA 700 stipulates that the Australian Auditing and Assurance Standards Board website is the only website to which reference can be made .
There is an expanded description of the responsibilities of directors/management and the auditor in relation to going concern which is mandatory for all Auditor’s Reports. These responsibilities are not new, but are now included for the first time in the Auditor’s Report.
If there are events or conditions that cast significant doubt on an entity’s ability to continue as a going concern, there are changes to the way this is reported:
- If the auditor concludes that a material uncertainty exists and disclosure within the financial report is adequate, the auditor expresses an unmodified opinion and the Auditor’s Report includes a separate section headed ‘Material Uncertainty Related to Going Concern’ instead of the previous ‘Emphasis of Matter’ paragraph. In this scenario it is not described in the KAM section if a listed entity.
- If the auditor concludes a material uncertainty does not exist and there is adequate disclosure in the financial report, in the case of a listed entity this is likely to be reported as a KAM as it is likely that it was a matter of most significance to the audit. This is often referred to as a ‘close call’ situation. If the entity is not listed and the auditor is not communicating KAMs, the matter is not reported in the Auditor’s Report.
Refer to question 20 for further details on going concern.