The Independent Auditor's Report on a Complete Set of General Purpose Financial Statements

  • The Independent Auditor's Report on a Complete Set of General Purpose Financial Statements

    Project Status

    Project completed - December 2004

    Objective(s) of project

    The objective of the project was to revise ISA 700, The Auditor's Report on Financial Statements.


    The scope of the project was auditors' reports on financial statements. The project did not address reporting issues for other engagements (e.g., review engagements or special purpose audit engagements).


    ISA 700 (Revised) enhances the transparency and comparability of an auditor's report across international borders. The new Standard sets out a framework to separate audit reporting requirements in connection with an ISA audit from additional supplementary reporting responsibilities required in some jurisdictions.

    Given the visibility of the auditor's report, consistent and generally accepted guidance on the form and content of the auditor's report is important in gaining both stakeholders' and auditors' understanding and acceptance of the ISAs.

    The ISA sets out clear guidance to the auditor in those circumstances when the audit is conducted in accordance with both ISAs and the auditing standards of a particular jurisdiction, and in particular on preparing an auditor's report to meet both the report structure required by the national jurisdiction and the requirements of the ISA.

    While the project did not otherwise entail a fundamental reconsideration of the approach to reporting, the IAASB took the opportunity to update and strengthen the requirements of the Standard. In particular, new guidance is given on the auditor's consideration of whether an accounting framework is acceptable, and on the need for the auditor to consider whether the financial statements are misleading even when they comply in all material respects with that framework.

    New wording of the auditor's report includes:

    • Better explanations of the respective responsibilities of management and the auditor.
    • An updated description of the audit process to reflect the new Audit Risk standards.
    • Clarification of the scope of the auditor's responsibilities with respect to internal control.



    Issues that had been addressed in the exposure draft included:

    • Guidance on the matters the auditor considers when forming the auditor's opinion on the fair presentation of the financial statements as a whole at the conclusion of the audit.
    • The auditor's performance and reporting responsibilities when the audit has been conducted in accordance with ISAs as well as national standards.
    • Guidance on how the auditor should report on other reporting responsibilities in addition to the auditor's opinion on the financial statements.
    • Guidance on the auditor's responsibilities with respect to supplementary financial statement information included with the financial statements that is not required by the financial reporting framework.
    • Clarification of the date of the auditor's report and its relationship to the date of the financial statements and the dates when the financial statements are considered to be approved and issued.
    • The auditor's responsibilities with respect to management's identification of an applicable financial reporting framework and how the auditor assesses whether that framework is "acceptable."
    • New wording for the auditor's report that better explains the respective responsibilities of management and the auditor; updates the description of the audit process; and clarifies the scope of the auditor's responsibilities with respect to internal controls.


    Task Force progress / Board discussions to date

    Following consultation with stakeholders, the IAASB confirmed the scope of the project at its December 2002 meeting.

    The IAASB confirmed at its March 2003 meeting that revisions to the standards and guidance on modified auditors' reports should be addressed in a separate project.

    At the December 2002 and March and May 2003 meetings, the IAASB also discussed and commented on the task force's recommendations on the approach and proposed positions for the issues. Input was received on proposed wording for the auditor's report from both the IAASB and the IAASB Consultative Advisory Group (CAG).

    In July and October 2003, the IAASB reviewed and commented on drafts of the proposed revised ISA 700 and conforming amendments to ISAs 200, 210, 560, 580 and 800, which reflected the agreed approach and proposed positions to the various issues.

    The IAASB approved the exposure draft in December 2003. Comments were requested by March 31, 2004.

    In June, September and December 2004, the IAASB discussed significant issues identified by respondents, as well as detailed analyses of the responses. Although the responses were generally supportive of the proposed revisions to ISA 700 and the conforming amendments, a broad range of comments and suggestions were offered. The most significant comments related to:

    • The approach and timing of the revision of ISA 700 in the light of the projects to revise ISAs 701 and 800.
    • The proposed guidance on:
      • Forming an opinion on the financial statements,
      • Assessing the acceptability of the applicable financial reporting framework, and
      • The date of the auditor’s report.
    • The level of prescription for the wording of the auditor’s report.

    While there were a number of suggestions regarding specific wording in the report, there was strong support for the two-part reporting model for reporting on other responsibilities of the auditor in addition to the financial statement audit and broad support for the proposed wording and structure of the report overall.


    Other Information

    In revising the auditor's report, the IAASB will be cognizant of the need to ensure consistency between the description of the auditor's responsibilities in the auditor's report and other ISAs that are under review, including:


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