REPORTS ARISING FROM CIRCUMSTANCES ADDRESSED IN CAS 710, COMPARATIVE INFORMATION – CORRESPONDING FIGURES AND COMPARATIVE FINANCIAL STATEMENTS
Introduction
1. These Illustrative Reports deal with circumstances addressed in CAS 710,Comparative Information — Corresponding Figures and Comparative
Financial Statements. Q&A 2(a) in this Guide discusses comparative
information and its effect on the auditor’s report. Q&A 2(k) in this Guide
discusses prior period financial statements audited by a predecessor
auditor.
2. The Illustrative Reports also reflect specific requirements in CAS 705,
Modifications to the Opinion in the Independent Auditor’s Report, relating
to the form of report containing a modification of opinion, as follows:
(a) Paragraph 17 of CAS 705 states that if there is a material
misstatement of the financial statements that relates to specific
amounts in the financial statements (including quantitative
disclosures), the auditor shall include in the basis for modification
paragraph a description and quantification of the financial effects
of the misstatements, unless impracticable. If it is not practicable to
quantify the financial effects, the auditor is required to so state in the
basis for modification paragraph. In these Illustrative Reports, it has
been assumed that it is practicable to quantify the financial effects of
the misstatements in such circumstances.
(b) Paragraph 22 of CAS 705 states that when the auditor modifies the
audit opinion, the auditor shall use the heading “Qualified Opinion,”
“Adverse Opinion,” or “Disclaimer of Opinion,” as appropriate, for the
opinion paragraph. Paragraph 26 of CAS 705 states that when the
auditor expresses a qualified or adverse opinion, the auditor shall
amend the description of the auditor’s responsibility to state that
the auditor believes that the audit evidence the auditor has obtained
is sufficient and appropriate to provide a basis for the auditor’s
modified audit opinion.
(c) Paragraph 23 of CAS 705 states that when the auditor expresses
a qualified opinion due to a material misstatement in the financial
statements, the auditor shall state in the opinion paragraph that
in the auditor’s opinion, “except for the effects of the matter(s)
described in the Basis for Qualified Opinion paragraph.” When the
modification arises from an inability to obtain sufficient appropriate
audit evidence, the auditor shall use the corresponding phrase
“except for the possible effects of the matter(s) described in the
Basis for Qualified Opinion paragraph” for the modified opinion.
(d) Paragraph 19 of CAS 705 contains requirements when there is a
material misstatement of the financial statements that relates to nondisclosure
of information required to be disclosed. Illustrative Reports
do not address this circumstance.
3. Although there is no specific requirement in CAS 710 to do so, the Basis
for Qualified Opinion paragraphs in the illustrations of auditor’s reports
in CAS 710 contain a reference to the auditor’s opinion in the prior
year. For example, these paragraphs use wording such as: “Our audit
opinion on the financial statements for the period ended… was modified
accordingly.” or “This caused us to modify our audit opinion on the
financial statements relating to that period.” Both practices have been
followed in the Illustrative Reports. Similarly, when a predecessor auditor
is involved, the equivalent wording is reflected as “The predecessor
auditor’s opinion on the financial statements for the period ended … was
modified accordingly.” or “This caused the predecessor auditor to modify
the audit opinion on the financial statements relating to that period.”
4. When a predecessor auditor is involved, Illustrative Reports also include,
for information purposes, an excerpt from the predecessor auditor’s
report on the prior year’s financial statements to assist understanding
of the wording of the auditor’s report on the current year’s financial
statements.
5. The Illustrative Reports in this section of the Guide do not address
specific reporting issues that arise when reporting on the first financial
statements under a new accounting framework. (Refer to Illustrative
Reports 1(a)-(c) and 2(a)-(d) in this Guide for such reports.)
6. Throughout the Illustrative Reports in this Guide, the generic term
“comparative information” is used in the auditor’s report. This is to
reflect the fact that this term is used in many financial reporting
frameworks, (for example, in the CPA Canada Handbook – Accounting
and the CPA Canada Public Sector Accounting Handbook), and is one
with which readers of financial statements are generally familiar. Some
Illustrative Reports in CAS 710 may refer to comparative information as
“corresponding figures”. “Corresponding figures” is terminology used in
the CASs but may not be understood by financial statement readers.
Summary of Auditor’s Reports Arising from Circumstances Addressed
in CAS 710, Comparative Information — Corresponding Figures and
Comparative Financial Statements
7(a) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising From a Departure from theFinancial Reporting Framework
Effects of the Matter on the Current Year are Material — Same Auditor for
Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor's report on the prior year, as previously issued,
included a qualified opinion arising from a departure from
Canadian accounting standards for private enterprises.
• The matter giving rise to the modification is unresolved.
• The effects of the matter on the current year’s figures are material
and require a modification to the auditor's opinion regarding the
current year figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor's report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor's opinion on the
current period's financial statements.
2. Paragraph 11(a) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor's report, when the effects or
possible effects of the matter on the current period’s figures are
material, the auditor shall refer to both the current period's figures
and the corresponding figures in the description of the matter
giving rise to the modification.
INDEPENDENT AUDITOR'S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes a
departure from Canadian accounting standards for private enterprises.
This is the result of a decision taken by management at the start of the
preceding financial year. This caused us to modify our audit opinion on
the financial statements relating to that year. Based on the straight-line
method of depreciation and annual rates of 5% for the building and
20% for the equipment, the loss for the year should be increased by
$xxx in 2011 and $xxx in 2010, property, plant and equipment should be
reduced by accumulated depreciation of $xxx in 2011 and $xxx in 2010,
and retained earnings should be decreased by $xxx in 2011 and $xxx in
2010.
Qualified Opinion
In our opinion, except for the effects of the matter described in the
Basis for Qualified Opinion paragraph, the financial statements present
fairly, in all material respects, the financial position of ABC Company
as at December 31, 2011, and the results of its operations and its cash
flows for the year then ended in accordance with Canadian accounting
standards for private enterprises.
[Auditor's signature]
[Date of the auditor's report]
[Auditor's address]
7(b) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising From a Departure from theFinancial Reporting Framework
Effects of the Matter on the Current Year are Material — Predecessor Auditor
for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor's report on the prior year, as previously
issued, included a qualified opinion arising from a departure from
Canadian accounting standards for private enterprises.
• The matter giving rise to the modification is unresolved.
• The effects of the matter on the current year’s figures are material
and require a modification to the auditor's opinion regarding the
current year figures.
• The auditor has decided to add an Other Matter paragraph
referring to the predecessor auditor’s report on the corresponding
figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor's report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor's opinion on the
current period's financial statements.
2. Paragraph 11(a) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor's report, when the effects or
possible effects of the matter on the current period’s figures are
material, the auditor shall refer to both the current period's figures
and the corresponding figures in the description of the matter
giving rise to the modification.
3. Paragraph 13 of CAS 710 states that if the financial statements
of the prior period were audited by a predecessor auditor and
the auditor is not prohibited by law or regulation from referring
to the predecessor auditor's report on the corresponding figures
and decides to do so, the auditor shall state in an Other Matter
paragraph in the auditor's report:
(a) that the financial statements of the prior period were audited
by the 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.
4. Excerpt from the predecessor auditor’s report on the financial
statements of ABC Company for the year ended December 31,
2010:
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes
a departure from Canadian accounting standards for private
enterprises. This is the result of a decision taken by management at
the start of the financial year. Based on the straight—line method
of depreciation and annual rates of 5% for the building and 20% for
the equipment, the loss for the year should be increased by $xxx,
property, plant and equipment should be reduced by accumulated
depreciation of $xxx, and retained earnings should be decreased
by $xxx.
INDEPENDENT AUDITOR'S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes a
departure from Canadian accounting standards for private enterprises.
This is the result of a decision taken by management at the start of
the preceding financial year. This caused the predecessor auditor to
modify the audit opinion on the financial statements relating to that
year. Based on the straight-line method of depreciation and annual
rates of 5% for the building and 20% for the equipment, the loss for the
year should be increased by $xxx in 2011 and $xxx in 2010, property,
plant and equipment should be reduced by accumulated depreciation
of $xxx in 2011 and $xxx in 2010, and retained earnings should be
decreased by $xxx in 2011 and $xxx in 2010.
Qualified Opinion
In our opinion, except for the effects of the matter described in the
Basis for Qualified Opinion paragraph, the financial statements present
fairly, in all material respects, the financial position of ABC Company
as at December 31, 2011, and the results of its operations and its cash
flows for the year then ended in accordance with Canadian accounting
standards for private enterprises.
Other Matter
The financial statements of ABC Company for the year ended
December 31, 2010 were audited by another auditor who expressed a
qualified opinion on those financial statements on March 31, 2011 for the
reasons described in the Basis for Qualified Opinion paragraph.
[Auditor's signature]
[Date of the auditor's report]
[Auditor's address]
7(c) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising from a Departure from theFinancial Reporting Framework
Matter Affects Both Years — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion arising from a departure from
Canadian accounting standards for private enterprises.
• The matter giving rise to the modification is unresolved.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheets as at December 31,
2011 and 2010, and the statements of income, retained earnings and
cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our qualified audit
opinion.
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes a
departure from Canadian accounting standards for private enterprises.
This is the result of a decision taken by management at the start of
the preceding financial year. Based on the straight-line method of
depreciation and annual rates of 5% for the building and 20% for the
equipment, the loss for the year should be increased by $xxx in 2011
and $xxx in 2010, property, plant and equipment should be reduced
by accumulated depreciation of $xxx in 2011 and $xxx in 2010, and
retained earnings should be decreased by $xxx in 2011 and $xxx in
2010.
Qualified Opinion
In our opinion, except for the effects of the matter described in the
Basis for Qualified Opinion paragraph, the financial statements present
fairly, in all material respects, the financial position of ABC Company
as at December 31, 2011 and 2010 and the results of its operations and
its cash flows for the years then ended in accordance with Canadian
accounting standards for private enterprises.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(d) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising From a Departure from theFinancial Reporting Framework
Matter Affects Both Years — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion arising from a departure from
Canadian accounting standards for private enterprises.
• The matter giving rise to the modification is unresolved.
• The predecessor auditor’s report on the prior year’s financial
statements was not reissued with the current year’s financial
statements.
• An Other Matter paragraph is required referring to the predecessor
auditor’s report on the prior year’s financial statements.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710 states that 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:
(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.
2. Excerpt from predecessor auditor’s report on the financial
statements of ABC Company for the year ended December 31,
2010:
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes
a departure from Canadian accounting standards for private
enterprises. This is the result of a decision taken by management
at the start of the financial year. Based on the straight-line method
of depreciation and annual rates of 5% for the building and 20% for
the equipment, the loss for the year should be increased by $xxx,
property, plant and equipment should be reduced by accumulated
depreciation of $xxx, and retained earnings should be decreased
by $xxx.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes a
departure from Canadian accounting standards for private enterprises.
This is the result of a decision taken by management at the start of
the preceding financial year. This caused the predecessor auditor to
modify the audit opinion on the financial statements relating to that
year. Based on the straight-line method of depreciation and annual
rates of 5% for the building and 20% for the equipment, the loss for the
year should be increased by $xxx in 2011 and $xxx in 2010, property,
plant and equipment should be reduced by accumulated depreciation
of $xxx in 2011 and $xxx in 2010, and retained earnings should be
decreased by $xxx in 2011 and $xxx in 2010.
Qualified Opinion
In our opinion, except for the effects of the matter described in the
Basis for Qualified Opinion paragraph, the financial statements present
fairly, in all material respects, the financial position of ABC Company
as at December 31, 2011 and the results of its operations and its cash
flows for the year then ended in accordance with Canadian accounting
standards for private enterprises.
Other Matter
The financial statements of ABC Company for the year ended
December 31, 2010 were audited by another auditor who expressed a
qualified opinion on those financial statements on March 31, 2011 for the
reasons described in the Basis for Qualified Opinion paragraph.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(e) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter on the Current Year Are Material — Same
Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Part V of the CPA Canada Handbook –
Accounting.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The possible effects of the matter on the current year’s figures
are material and require a modification to the auditor’s opinion
regarding the current year figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor’s report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor’s opinion on the
current period’s financial statements.
2. Paragraph 11(a) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor’s report, when the effects or
possible effects of the matter on the current period’s figures are
material, the auditor shall refer to both the current period’s figures
and the corresponding figures in the description of the matter
giving rise to the modification.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC Notfor-
Profit Organization, which comprise the statement of financial
position as at December 31, 2011, and the statements of operations,
changes in net assets and cash flows for the year then ended, and
a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian generally
accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, verification of these revenues was limited
to the amounts recorded in the records of ABC Not-for-Profit
Organization. Therefore, we were not able to determine whether any
adjustments might be necessary to fundraising revenue, excess of
revenues over expenses, and cash flows from operations for the years
ended December 31, 2011 and 2010, current assets as at December 31,
2011 and 2010, and net assets as at January 1 and December 31 for both
the 2011 and 2010 years. Our audit opinion on the financial statements
for the year ended December 31, 2010 was modified accordingly
because of the possible effects of this limitation in scope.
Qualified Opinion
In our opinion, except for the possible effects of the matter described
in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC Notfor-
Profit Organization as at December 31, 2011, and the results of its
operations and its cash flows for the year then ended in accordance
with Canadian generally accepted accounting principles.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(f) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter on the Current Year Are Material —
Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Part V of the CPA Canada Handbook –
Accounting.
• The auditor is required to report only on the current year financial
statements.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The possible effects of the matter on the current year’s figures
are material and require a modification to the auditor’s opinion
regarding the current year figures.
• The auditor has decided to add an Other Matter paragraph
referring to the predecessor auditor’s report on the corresponding
figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor’s report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor’s opinion on the
current period’s financial statements.
2. Paragraph 11(a) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor’s report, when the effects or
possible effects of the matter on the current period’s figures are
material, the auditor shall refer to both the current period’s figures
and the corresponding figures in the description of the matter
giving rise to the modification.
3. Paragraph 13 of CAS 710 states that if the financial statements
of the prior period were audited by a predecessor auditor and
the auditor is not prohibited by law or regulation from referring
to the predecessor auditor’s report on the corresponding figures
and decides to do so, the auditor shall state in an Other Matter
paragraph in the auditor’s report:
(a) that the financial statements of the prior period were audited
by the 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
4. Excerpt from the predecessor auditor’s report on the financial
statements of ABC Company for the year ended December 31,
2010:
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, verification of these revenues was limited
to the amounts recorded in the records of ABC Not-for-Profit
Organization. Therefore, we were not able to determine whether
any adjustments might be necessary to fundraising revenue, excess
of revenues over expenses, and cash flows from operations for the
years ended December 31, 2010 and 2009, current assets as at
December 31, 2010 and 2009, and net assets as at January 1 and
December 31 for both the 2010 and 2009 years. Our audit opinion
on the financial statements for the year ended December 31, 2009
was modified accordingly because of the possible effects of this
limitation in scope.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC Notfor-
Profit Organization, which comprise the statement of financial
position as at December 31, 2011, and the statements of operations,
changes in net assets and cash flows for the year then ended, and
a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian generally
accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, verification of these revenues was limited
to the amounts recorded in the records of ABC Not-for-Profit
Organization. Therefore, we were not able to determine whether any
adjustments might be necessary to fundraising revenue, excess of
revenues over expenses, and cash flows from operations for the year
ended December 31, 2011, current assets as at December 31, 2011, and
net assets as at January 1, 2011 and December 31, 2011. The predecessor
auditor’s opinion on the financial statements for the year ended
December 31, 2010 was modified because of the possible effects of a
similar limitation in scope.
Qualified Opinion
In our opinion, except for the possible effects of the matter described
in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC Notfor-
Profit Organization as at December 31, 2011, and the results of its
operations and its cash flows for the year then ended in accordance
with Canadian generally accepted accounting principles.
Other Matter
The financial statements of ABC Not-for-Profit Organization for the
year ended December 31, 2010 were audited by another auditor
who expressed a qualified opinion on those financial statements on
March 31, 2011 for the reasons described in the Basis for Qualified
Opinion paragraph.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(g) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising from a Scope LimitationMatter Affects Both Years — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Part V of the CPA Canada Handbook –
Accounting.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC Notfor-
Profit Organization, which comprise the statements of financial
position as at December 31, 2011 and 2010, and the statements of
operations, changes in net assets and cash flows for the years then
ended, and a summary of significant accounting policies and other
explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian generally
accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our qualified audit
opinion.
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, verification of these revenues was limited
to the amounts recorded in the records of ABC Not-for-Profit
Organization. Therefore, we were not able to determine whether any
adjustments might be necessary to fundraising revenue, excess of
revenues over expenses, and cash flows from operations for the years
ended December 31, 2011 and 2010, current assets as at December 31,
2011 and 2010, and net assets as at January 1 and December 31 for both
the 2011 and 2010 years.
Qualified Opinion
In our opinion, except for the possible effects of the matter described
in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC
Not-for-Profit Organization as at December 31, 2011 and 2010, and the
results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(h) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising from a Scope LimitationMatter Affects Both Years — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Part V of the CPA Canada Handbook –
Accounting.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The predecessor auditor’s report on the prior year financial
statements is not reissued with the current year’s financial
statements.
• An Other Matter paragraph is required referring to the predecessor
auditor’s report on the prior year’s financial statements.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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:
(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.
2. Excerpt from the predecessor auditor’s report on the financial
statements of ABC Not-for-profit Organization for the year ended
December 31, 2010:
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, our verification of these revenues was
limited to the amounts recorded in the records of ABC Not-for-
Profit Organization. Therefore, we were not able to determine
whether any adjustments might be necessary to fundraising
revenue, excess of revenues over expenses, and cash flows from
operations for the years ended December 31, 2010 and 2009,
current assets as at December 31, 2010 and 2009, and net assets as
at January 1 and December 31 for both the 2010 and 2009 years.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC Notfor-
Profit Organization, which comprise the statements of financial
position as at December 31, 2011, and the statements of operations,
changes in net assets and cash flows for the year then ended, and
a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian generally
accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
In common with many not-for-profit organizations, ABC Not-for-
Profit Organization derives revenue from fundraising activities
the completeness of which is not susceptible to satisfactory audit
verification. Accordingly, verification of these revenues was limited
to the amounts recorded in the records of ABC Not-for-Profit
Organization. Therefore, we were not able to determine whether any
adjustments might be necessary to fundraising revenue, excess of
revenues over expenses, and cash flows from operations for the year
ended December 31, 2011, current assets as at December 31, 2011, and
net assets as at January 1, 2011 and December 31, 2011. The predecessor
auditor’s opinion on the financial statements for the year ended
December 31, 2010 was modified because of the possible effects of a
similar limitation in scope.
Qualified Opinion
In our opinion, except for the possible effects of the matter described
in the Basis for Qualified Opinion paragraph, the financial statements
present fairly, in all material respects, the financial position of ABC Notfor-
Profit Organization as at December 31, 2011, and the results of its
operations and its cash flows for the year then ended in accordance
with Canadian generally accepted accounting principles.
Other Matter
The financial statements of ABC Not-for-Profit Organization for the
year ended December 31, 2010 were audited by another auditor who
expressed a qualified opinion on those financial statements on March
31, 2011 for the reasons described in the Basis for Qualified Opinion
paragraph.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(i) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter Affect the Comparability of the Current and
Prior Years — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with Canadian accounting standards
for private enterprises. The entity uses the indirect method for
reporting cash flows from operating activities.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The possible effects of the matter are limited to the comparability
of the current year’s figures and the corresponding figures.
• The balance sheet as at December 31, 2011 is fairly presented. An
opinion that is qualified regarding comparability of the results of
operations and cash flows and unmodified regarding the financial
position as at December 31, 2011 is considered appropriate in the
circumstances.
• Law or regulation does not prohibit an opinion which is qualified
or disclaimed, as appropriate, regarding the results of operations,
and cash flows, where relevant, and unmodified regarding financial
position.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor’s report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor’s opinion on the
current period’s financial statements.
2. Paragraph 11(b) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor’s report, when the effects
or possible effects of the matter on the current period’s figures
are not material, the auditor shall explain that the audit opinion
has been modified because of the effects or possible effects of
the unresolved matter on the comparability of the current period’s
figures and the corresponding figures.
3. Paragraph A8 of CAS 510, Initial Audit Engagements — Opening
Balances, states that CAS 705, Modifications to the Opinion in
the Independent Auditor’s Report, establishes requirements
and provides guidance on circumstances that may result in a
modification to the auditor’s opinion on the financial statements,
the type of opinion appropriate in the circumstances, and the
content of the auditor’s report when the auditor’s opinion
is modified. The inability of the auditor to obtain sufficient
appropriate audit evidence regarding opening balances may result
in one of the following modifications to the opinion in the auditor’s
report:
(a) a qualified opinion or a disclaimer of opinion, as is appropriate
in the circumstances; or
(b) unless prohibited by law or regulation, an opinion which is
qualified or disclaimed, as appropriate, regarding the results
of operations, and cash flows, where relevant, and unmodified
regarding financial position.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion on the results
of operations and cash flows and our unmodified audit opinion on the
financial position.
Basis for Qualified Opinion on the Results of Operations and Cash
Flows
Because we were appointed auditors of ABC Company during 2010,
we were not able to observe the counting of the physical inventories
at the beginning of that year or satisfy ourselves concerning those
inventory quantities by alternative means. Since opening inventories
affect the determination of the results of operations and cash flows,
we were unable to determine whether adjustments to the results of
operations and cash flows might be necessary for 2010. Our audit
opinion on the financial statements for the year ended December
31, 2010 was modified accordingly. Our opinion on the current year’s
financial statements is also modified because of the possible effects of
this matter on the comparability of the current period’s figures and the
comparative information.
Qualified Opinion on the Results of Operations and Cash Flows
In our opinion, except for the possible effects on the comparative
information of the matter described in the Basis for Qualified Opinion
on the Results of Operations and Cash Flows paragraph, the statements
of income, retained earnings and cash flows present fairly, in all material
respects, the results of operations and cash flows of ABC Company
for the year ended December 31, 2011 in accordance with Canadian
accounting standards for private enterprises.
Opinion on the Financial Position
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of ABC Company as at December 31, 2011 in
accordance with Canadian accounting standards for private enterprises.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(j) — Corresponding Figures
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter Affect the Comparability of the Current and
Prior Years — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with Canadian accounting standards
for private enterprises. The entity uses the indirect method for
reporting cash flows from operating activities.
• The auditor is required to report only on the current year financial
statements.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion arising from the scope
limitation.
• The matter giving rise to the modification is unresolved.
• The possible effects of the matter are limited to the comparability
of the current year’s figures and the corresponding figures.
• The balance sheet as at December 31, 2011 is fairly presented. An
opinion that is qualified regarding comparability of the results of
operations and cash flows and unmodified regarding the financial
position as at December 31, 2011 is considered appropriate in the
circumstances.
• Law or regulation does not prohibit an opinion which is qualified
or disclaimed, as appropriate, regarding the results of operations,
and cash flows, where relevant, and unmodified regarding financial
position.
• The auditor has decided to add an Other Matter paragraph
referring to the predecessor auditor’s report on the corresponding
figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 11 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the auditor’s report on the prior period, as previously
issued, included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification
is unresolved, the auditor shall modify the auditor’s opinion on the
current period’s financial statements.
2. Paragraph 11(b) of CAS 710 requires that in the Basis for
Modification paragraph in the auditor’s report, when the effects
or possible effects of the matter on the current period’s figures
are not material, the auditor shall explain that the audit opinion
has been modified because of the effects or possible effects of
the unresolved matter on the comparability of the current period’s
figures and the corresponding figures.
3. Paragraph 13 of CAS 710 states that if the financial statements
of the prior period were audited by a predecessor auditor and
the auditor is not prohibited by law or regulation from referring
to the predecessor auditor’s report on the corresponding figures
and decides to do so, the auditor shall state in an Other Matter
paragraph in the auditor’s report:
(a) that the financial statements of the prior period were audited
by the 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.
4. Excerpt from the predecessor auditor’s report on the financial
statements of ABC Company for the year ended December 31,
2010:
Basis for Qualified Opinion on the Results of Operations and Cash
Flows
We were not able to observe the counting of the physical
inventories at the beginning of the year or satisfy ourselves
concerning those inventory quantities by alternative means. Since
opening inventories affect the determination of the results of
operations and cash flows, we were unable to determine whether
adjustments to the results of operations and cash flows might be
necessary for 2010.
Qualified Opinion on the Results of Operations and Cash Flows
In our opinion, except for the effects of the matter described in the
Basis for Qualified Opinion paragraph, the statements of income,
retained earnings and cash flows present fairly, in all material
respects, the results of operations and cash flows of ABC Company
for the year ended December 31, 2010 in accordance with Canadian
accounting standards for private enterprises.
Opinion on the Financial Position
In our opinion, the balance sheet presents fairly, in all material
respects, the financial position of ABC Company as at December
31, 2010 in accordance with Canadian accounting standards for
private enterprises.
5. Paragraph A8 of CAS 510, Initial Audit Engagements — Opening
Balances, states that CAS 705, Modifications to the Opinion in
the Independent Auditor’s Report, establishes requirements
and provides guidance on circumstances that may result in a
modification to the auditor’s opinion on the financial statements,
the type of opinion appropriate in the circumstances, and the
content of the auditor’s report when the auditor’s opinion
is modified. The inability of the auditor to obtain sufficient
appropriate audit evidence regarding opening balances may result
in one of the following modifications to the opinion in the auditor’s
report:
(a) a qualified opinion or a disclaimer of opinion, as is appropriate
in the circumstances; or
(b) unless prohibited by law or regulation, an opinion which is
qualified or disclaimed, as appropriate, regarding the results
of operations, and cash flows, where relevant, and unmodified
regarding financial position.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion on the results
of operations and cash flows and our unmodified audit opinion on the
financial position
Basis for Qualified Opinion on the Results of Operations and Cash
Flows
The predecessor auditor was not able to observe the counting of the
physical inventories at the beginning of 2010 or be satisfied concerning
those inventory quantities by alternative means. Since opening
inventories affect the determination of the results of operations and
cash flows, the predecessor auditor was unable to determine whether
adjustments to the results of operations and cash flows might be
necessary for 2010. The predecessor auditor’s opinion on the financial
statements for the year ended December 31, 2010 was modified
accordingly. Our opinion on the current year’s financial statements
is also modified because of the possible effects of this matter on
the comparability of the current year’s figures and the comparative
information.
Qualified Opinion on the Results of Operations and Cash Flows
In our opinion, except for the possible effects on the comparative
information of the matter described in the Basis for Qualified Opinion
on the Results of Operations and Cash Flows paragraph, the statements
of income, retained earnings and cash flows present fairly, in all material
respects, the results of operations and cash flows of ABC Company
for the year ended December 31, 2011 in accordance with Canadian
accounting standards for private enterprises.
Opinion on the Financial Position
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of ABC Company as at December 31, 2011 in
accordance with Canadian accounting standards for private enterprises.
Other Matter
The financial statements of ABC Company for the year ended
December 31, 2010 were audited by another auditor who expressed
a modified opinion on March 31, 2011 on the statements of income,
retained earnings and cash flows for the year ended December 31, 2010
for the reasons described in the Basis for Qualified Opinion on the
Results of Operations and Cash Flows paragraph, and an unmodified
audit opinion on the financial position as at December 31, 2010.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(k) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter Affect the Prior Year Only — Same Auditor for
Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with International Financial Reporting
Standards. The entity uses the indirect method for reporting cash
flows from operating activities.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The statements of financial position as at December 31, 2011 and
2010 are fairly presented.
• An opinion that is qualified regarding the financial performance
and cash flows the year ended December 31, 2010 and unmodified
regarding the financial performance and cash flows for the year
ended December 31, 2011 and the statements of financial position
as at December 31, 2011 and 2010 is considered appropriate in the
circumstances.
• Law or regulation does not prohibit an opinion which is qualified
or disclaimed, as appropriate, regarding the results of operations,
and cash flows, where relevant, and unmodified regarding financial
position.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph A8 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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.
2. Paragraph A8 of CAS 510, Initial Audit Engagements — Opening
Balances, states that CAS 705, Modifications to the Opinion in
the Independent Auditor’s Report, establishes requirements
and provides guidance on circumstances that may result in a
modification to the auditor’s opinion on the financial statements,
the type of opinion appropriate in the circumstances, and the
content of the auditor’s report when the auditor’s opinion
is modified. The inability of the auditor to obtain sufficient
appropriate audit evidence regarding opening balances may result
in one of the following modifications to the opinion in the auditor’s
report:
(a) a qualified opinion or a disclaimer of opinion, as is appropriate
in the circumstances; or
(b) unless prohibited by law or regulation, an opinion which is
qualified or disclaimed, as appropriate, regarding the results
of operations, and cash flows, where relevant, and unmodified
regarding financial position.
3. This Illustrative Report can be contrasted with the equivalent
Illustrative Report under the corresponding figures approach (see
Illustrative Report 7(i) in this Guide). A reference to the possible
effects on the comparability of the current period’s figures and the
corresponding figures, as required by paragraph 11(b) of CAS 710
and included in Illustrative Report 7(i), is not required under the
comparative financial statements approach because the auditor’s
opinion refers to each period for which financial statements are
presented.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the statements of financial position as at
December 31, 2011 and 2010, and the statements of comprehensive
income, statements of changes in equity and statements of cash flows
for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our qualified opinion
on the financial performance and cash flows for the year ended
December 31, 2010 and our unmodified audit opinion on the financial
position as at December 31, 2010 and on the financial statements for
the year ended December 31, 2011.
Basis for Qualified Opinion on the Financial Performance and Cash
Flows
Because we were appointed auditors of ABC Company during 2010, we
were not able to observe the counting of the physical inventories at the
beginning of that year or satisfy ourselves concerning those inventory
quantities by alternative means. Since opening inventories affect the
determination of the financial performance and cash flows, we were
unable to determine whether adjustments to the financial performance
and cash flows might be necessary for the year ended December 31,
2010.
Qualified Opinion on the Financial Performance and Cash Flows
In our opinion, except for the possible effects of the matter described
in the Basis for Qualified Opinion on the Financial Performance and
Cash Flows paragraph, the statement of comprehensive income,
statement of changes in equity and statement of cash flows present
fairly, in all material respects, the financial performance and cash flows
of ABC Company for the year ended December 31, 2010 in accordance
with International Financial Reporting Standards.
Opinion on the Financial Position, Financial Performance and Cash
Flows
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011 and 2010 and its financial performance and its cash flows for
the year ended December 31, 2011 in accordance with International
Financial Reporting Standards.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(l) — Comparative Financial Statements
Unresolved Qualification in a Prior Year Arising from a Scope LimitationPossible Effects of the Matter Affect Prior Year Only — Predecessor Auditor
for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with Canadian accounting standards
for private enterprises. The entity uses the indirect method for
reporting cash flows from operating activities.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion arising from a scope limitation.
• The matter giving rise to the modification is unresolved.
• The predecessor auditor’s report on the prior year financial
statements is not reissued with the financial statements.
• An Other Matter paragraph is required referring to the predecessor
auditor’s report on the prior year’s financial statements.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. The form of this illustrative Report would be identical to illustrative
Report 7(j) in this Guide.
7(m) — Corresponding Figures
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor obtained audit evidence that a material misstatement
exists in the prior year financial statements on which an unmodified
opinion has previously been expressed.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated.
• The auditor has decided to add an Emphasis of Matter paragraph
referring to disclosures that fully describe the restatement of the
corresponding figures.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph A6 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that when prior period financial statements that are
misstated have not been amended and an auditor’s report has not
been reissued, but the corresponding figures have been properly
restated or appropriate disclosures have been made in the current
period financial statements, the auditor’s report may include an
Emphasis of Matter paragraph describing the circumstances and
referring, where relevant, to disclosures that fully describe the
matter that can be found in the financial statements.
2. Although the auditor would obtain sufficient appropriate audit
evidence that the prior year’s closing balances have been
appropriately restated, there is no requirement in CAS 710 for the
auditor to explain in the auditor’s report that the adjustments made
to the corresponding figures have been audited. However, the
auditor may consider it appropriate to include a statement along
the following lines: “We also audited the adjustments described in
Note X to the financial statements that were applied to restate the
comparative information for the year ended December 31, 2010.
In our opinion, such adjustments are appropriate and have been
properly applied.” Such a statement might be added by including
it in a new paragraph (perhaps titled “Restated Comparative
Information”) that includes the content of, and replaces, the
Emphasis of Matter paragraph, or by including it in an Other Matter
paragraph. The statement is consistent with the example wording
included in paragraph A11 of CAS 710. Such a statement has not
been included in this Illustrative Report.
3. CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report, requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
In such a circumstance, the auditor may include an Emphasis of
Matter paragraph to alert readers that the comparative information
in the financial statements has been restated.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011, and the results of its operations and its cash flows for the year
then ended in accordance with Canadian accounting standards for
private enterprises.
Emphasis of Matter
Without modifying our opinion, we draw attention to Note X to
the financial statements, which explains that certain comparative
information for the year ended December 31, 2010 has been restated.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(n) — Corresponding Figures
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The financial statements for the prior year were audited by the
predecessor auditor.
• The auditor obtained audit evidence that a material misstatement
exists in the prior year financial statements on which an unmodified
opinion has previously been expressed by the predecessor auditor.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current year
financial statements. A note to the financial statements explains the
restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated,
as required by paragraph 6 of CAS 510, Initial Audit Engagements
—Opening Balances.
• The auditor has decided to add an Emphasis of Matter paragraph
referring to disclosures that fully describe the restatement of the
corresponding figures. The auditor has also decided to add an
Other Matter paragraph that refers to the predecessor auditor’s
report on the corresponding figures. Because both paragraphs are
interrelated, the auditor has decided to combine the paragraphs
into one paragraph entitled “Restated Comparative Information”.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 13 of CAS 710, Comparative Information —Corresponding
Figures and Comparative Financial Statements, states that if
the financial statements of the prior period were audited by a
predecessor auditor and the auditor is not prohibited by law or
regulation from referring to the predecessor auditor’s report on the
corresponding figures and decides to do so, the auditor shall state
in an Other Matter paragraph in the auditor’s report:
(a) that the financial statements of the prior period were audited
by the 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.
2. Paragraph A6 of CAS 710 states that when prior period financial
statements that are misstated have not been amended and an
auditor’s report has not been reissued, but the corresponding
figures have been properly restated or appropriate disclosures
have been made in the current period financial statements, the
auditor’s report may include an Emphasis of Matter paragraph
describing the circumstances and referring, where relevant, to
disclosures that fully describe the matter that can be found in the
financial statements.
3. Although the auditor is required to obtain sufficient appropriate
audit evidence that the prior year’s closing balances have
been appropriately restated, as required by paragraph 6 of
CAS 510, Initial Audit Engagements — Opening Balances, there
is no requirement in CAS 710 for the auditor to explain in the
auditor’s report that the adjustments made to the corresponding
figures have been audited. However, the auditor may consider
it appropriate to include a statement along the following
lines: “We audited the adjustments described in Note X to the
financial statements that were applied to restate the comparative
information for the year ended December 31, 2010. In our opinion,
such adjustments are appropriate and have been properly applied.”
Such a statement might be added by including it in the Restated
Comparative Information paragraph. The statement is consistent
with the example wording included in paragraph A11 of CAS 710.
Such a statement has not been included in this Illustrative Report.
4. CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report, requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
In such a circumstance, the auditor may include an Emphasis of
Matter paragraph to alert readers that the comparative information
in the financial statements has been restated.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011, and the results of its operations and its cash flows for the year
then ended in accordance with Canadian accounting standards for
private enterprises.
Restated Comparative Information
Without modifying our opinion, we draw attention to Note X to
the financial statements, which explains that certain comparative
information for the year ended December 31, 2010 has been restated.
The financial statements of ABC Company for the year ended
December 31, 2010 (prior to the restatement of the comparative
information) were audited by another auditor who expressed an
unmodified opinion on those financial statements on March 31, 2011.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(o) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with International Financial Reporting
Standards.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor obtained evidence that a material misstatement exists
in the prior year financial statements on which an unmodified
opinion has previously been expressed.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. The auditor’s opinion on the prior year’s financial statements
was appropriately unmodified. The auditor’s opinion on the
restated comparative financial statements is also unmodified.
CAS 710, Comparative Information — Corresponding Figures and
Comparative Financial Statements, does not require the auditor
to make any specific references in the auditor’s report in this
circumstance. The auditor would issue a report with an unmodified
opinion.
2. CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report, requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
In such a circumstance, the auditor may include an Emphasis of
Matter paragraph to alert readers that the comparative information
in the financial statements has been restated, along the following
lines: “Without modifying our opinion, we draw attention to Note X
to the financial statements, which explains that certain comparative
information for the [period ended] has been restated.” Such
wording is consistent with other Illustrative Reports in this Guide
(see, for example, Illustrative Report 7(m)).
7(p) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with International Financial Reporting
Standards.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The auditor obtained evidence that a material misstatement exists
in the prior year financial statements on which an unmodified
opinion has previously been expressed.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The predecessor auditor’s report on the prior year’s financial
statements was not reissued with the current year’s financial
statements.
• An Other Matter paragraph is required referring to the predecessor
auditor’s report on the prior year’s financial statements.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated,
as required by paragraph 6 of CAS 510, Initial Audit Engagements
— Opening Balances.
• The auditor was engaged to report as to the appropriateness of
the restatement. Accordingly, the auditor expanded the Other
Matter paragraph for additional explanation indicating that the
auditor audited the adjustments that were applied to restate
the comparative financial statements and titled it “Restated
Comparative Information”.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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:
(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.
2. Paragraph 18 of CAS 710 states that 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.
3. Paragraph A11 of CAS 710 states that 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 an Other Matter paragraph indicating that the auditor
was so engaged.
4. As discussed in paragraph 2 of Illustrative Report 7(o), the auditor
may consider it necessary to alert readers by using an Emphasis
of Matter paragraph that the comparative information in the
financial statements has been restated. This has not been done
in this Illustrative Report because the Restated Comparative
Information paragraph draws readers’ attention to the fact that the
comparative information has been restated and refers to the note
to the financial statements, which explains the restatement.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the statement of financial position as at
December 31, 2011, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011 and its financial performance and its cash flows for the year then
ended in accordance with International Financial Reporting Standards.
Restated Comparative Information
The financial statements of ABC Company for the year ended
December 31, 2010 (prior to the restatement of the comparative
information described in Note X to the financial statements) were
audited by another auditor who expressed an unmodified opinion on
those financial statements on March 31, 2011.
As part of our audit of the financial statements of ABC Company for
the year ended December 31, 2011, we also audited the adjustments
described in Note X that were applied to restate the financial
statements for the year ended December 31, 2010. 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 financial
statements of ABC Company for the year ended December 31, 2010
other than with respect to the adjustments and, accordingly, we do
not express an opinion or any other form of assurance on the financial
statements for the year ended December 31, 2010 taken as a whole.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(q) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2013
are prepared in accordance with International Financial
Reporting Standards.
• The comparative information (i.e., for the year ended December
31, 2012) has been retrospectively restated for a change in
accounting policy. A note to the financial statements explains the
restatement.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• An opening statement of financial position (i.e., as at January
1, 2012) is included in the financial statements because the
retrospective restatement has a material effect on the
information in the statement of financial position at the beginning
of the preceding period. A note to the financial statements
explains the restatement.
• The financial statements for the prior year (and earlier years)
were audited by a predecessor auditor.
• The predecessor auditor’s report on the prior year’s financial
statements was not reissued with the current year’s financial
statements. Accordingly, an Other Matter paragraph is required
referring to the predecessor auditor’s report on the prior year’s
financial statements.
• Neither the successor auditor nor the predecessor auditor was
engaged to provide an audit opinion on the restated information.
The successor auditor was engaged to report as to the
appropriateness of the restatement. Accordingly, the successor
auditor expanded the Other Matter paragraph for additional
explanation indicating that the successor auditor audited the
adjustments that were applied to restate the comparative
financial statements and titled it “Restated Comparative
Information”.
• The successor auditor has obtained sufficient appropriate audit
evidence about whether opening balances contain misstatements
that materially affect the current period’s financial statements,
as required by paragraph 6 of CAS 510, Initial Audit
Engagements — Opening Balances.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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:
(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.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the statement of financial position as at
December 31, 2013, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2013 and its financial performance and its cash flows for the year then
ended in accordance with International Financial Reporting Standards.
Restated Comparative Information
The statement of financial position as at January 1, 2012 has been
derived from the statement of financial position as at December 31, 2011
(not presented herein). The financial statements of ABC Company for
the years ended December 31, 2012 and 2011 (prior to the restatement
described in Note X to the financial statements) were audited by
another auditor who expressed an unmodified opinion on those
financial statements on [dates] respectively.
As part of our audit of the financial statements of ABC Company for
the year ended December 31, 2013, we also audited the adjustments
described in Note X that were applied to restate the financial
statements for the year ended December 31, 2012 and to derive the
statement of financial position as at January 1, 2012. 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
financial statements of ABC Company for the years ended December
31, 2012 and 2011 or to the statement of financial position as at January
1, 2012 other than with respect to the adjustments and, accordingly,
we do not express an opinion or any other form of assurance on the
financial statements for the years ended December 31, 2012 and 2011
or the statement of financial position as at January 1, 2012 taken as a
whole.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(r) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationUnmodified Opinion in Prior Year — Predecessor Auditor for Prior Year is
Reporting on Comparative Information
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2013
are prepared in accordance with International Financial
Reporting Standards.
• The comparative information (i.e., for the year ended December
31, 2012) has been retrospectively restated for a change in
accounting policy. A note to the financial statements explains the
restatement.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• An opening statement of financial position (i.e., as at January
1, 2012) is included in the financial statements because the
retrospective restatement has a material effect on the
information in the statement of financial position at the
beginning of the preceding period. A note to the financial
statements explains the restatement.
• The financial statements for the prior year (and earlier years)
were audited by a predecessor auditor.
• The predecessor auditor’s report on the prior year’s financial
statements was not reissued with the current year’s financial
statements.
• The securities regulator requires an audit opinion on all periods
presented.
• The predecessor auditor has been engaged to audit the
comparative information in the financial statements and the
related summary of significant accounting policies and other
explanatory information (i.e., for the year ended December 31,
2012 and as at January 1, 2012). The predecessor auditor has
decided to add an Other Matter paragraph to the predecessor
auditor’s report explaining that the financial statements for
the year ended December 31, 2013, other than the comparative
information, were audited by another auditor.
• The successor auditor has been engaged to only report on the
current reporting period information in the financial statements
(i.e., for the year ended December 31, 2013).
• The successor auditor has decided to add an Other Matter
paragraph that refers to the predecessor auditor’s report on the
comparative information and titled it “Restated Comparative
Information”.
• The audits were conducted in accordance with Canadian
Auditing Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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:
(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.
Successor Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the statement of financial position as at
December 31, 2013, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
International Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2013 and its financial performance and its cash flows for the year
then ended in accordance with International Financial Reporting
Standards.
Restated Comparative Information
The accompanying comparative information of ABC Company,
which comprises the statements of financial position as at
December 31, 2012 and January 1, 2012, the statement of
comprehensive income, statement of changes in equity, and
statement of cash flows of ABC Company for the year ended
December 31, 2012, and the summary of significant accounting
policies and other explanatory information, including Note X, which
explains that certain comparative information has been restated,
were audited by another auditor who expressed an unmodified
opinion on [date].
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
Predecessor Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying comparative information
of ABC Company, which comprises the statements of financial
position as at December 31, 2012 and January 1, 2012, the statement
of comprehensive income, statement of changes in equity and
statement of cash flows for the year ended December 31, 2012,
and the summary of significant accounting policies and other
explanatory information, including Note X, which explains that
certain comparative information has been restated.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of the financial statements in accordance with
International Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the comparative
information in these accompanying financial statements based on
our audit. We conducted our audit in accordance with Canadian
generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the comparative information in these financial
statements presents fairly, in all material respects, the financial
position of ABC Company as at December 31, 2012 and
January 1, 2012, and its financial performance and its cash flows for
the year ended December 31, 2012, in accordance with International
Financial Reporting Standards.
Other Matter
The accompanying financial statements of ABC Company, which
comprise the statement of financial position as at December 31,
2013, the statement of comprehensive income, statement of
changes in equity, and statement of cash flows of ABC Company
for the year then ended, and the summary of significant accounting
policies and other explanatory information, were audited by
another auditor who expressed an unmodified opinion on [date].
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(s) — Corresponding Figures
Financial Statements with Restated Comparative InformationQualified Opinion in Prior Year — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion because the entity did not depreciate
property, plant and equipment as required by Canadian accounting
standards for private enterprises. The entity has decided to
depreciate property, plant and equipment as required by Canadian
accounting standards for private enterprises with retrospective
application.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated.
• The audit is conducted in accordance with Canadian Auditing
Standards
(Please read Introduction to Illustrative Reports)
1. The auditor’s opinion on the prior year’s financial statements
was appropriately modified. There is no requirement for the
auditor to make reference in the auditor’s report on the current
year’s financial statements to the fact that the comparative
information in the current year’s financial statements has been
restated. Paragraph A3 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that when the auditor’s report on the prior period, as
previously issued, included a qualified opinion, a disclaimer of
opinion, or an adverse opinion and the matter which gave rise
to the modified opinion is resolved and properly accounted for
or disclosed in the financial statements in accordance with the
applicable financial reporting framework, the auditor’s opinion on
the current period need not refer to the previous modification.
Accordingly, the auditor would issue a report with an unmodified
opinion.
2. Although the auditor would obtain sufficient appropriate audit
evidence that the prior year’s closing balances have been
appropriately restated, there is no requirement in CAS 710 for
the auditor to explain in the auditor’s report that the adjustments
made to the corresponding figures have been audited. However,
the auditor may consider it appropriate to include a statement
along the following lines: “We audited the adjustments described
in Note X to the financial statements that were applied to restate
the comparative information for the year ended December 31, 2010.
In our opinion, such adjustments are appropriate and have been
properly applied.” Such a statement might be added by including
it in a new paragraph (perhaps titled “Restated Comparative
Information”). The statement is consistent with the example
wording included in paragraph A11 of CAS 710. Such a statement
has not been included in this Illustrative Report.
3. CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report, requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
In such a circumstance, the auditor may include an Emphasis of
Matter paragraph to alert readers that the comparative information
in the financial statements has been restated, along the following
lines: “Without modifying our opinion, we draw attention to Note X
to the financial statements, which explains that certain comparative
information for the [period ended] has been restated.” Such
wording is consistent with other Illustrative Reports in this Guide
(ee, for example, Illustrative Report 7(m)).
7(t) — Corresponding Figures
Financial Statements with Restated Comparative InformationQualified Opinion in Prior Year — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion because the entity did not
depreciate property, plant and equipment as required by Canadian
accounting standards for private enterprises. The entity has
decided to depreciate property, plant and equipment as required
by Canadian accounting standards for private enterprises with
retrospective application.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated,
as required by paragraph 6 of CAS 510, Initial Audit Engagements
— Opening Balances.
• The audit is conducted in accordance with Canadian Auditing
Standards
(Please read Introduction to Illustrative Reports)
1. Paragraph 13 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that if the financial statements of the prior period were
audited by a predecessor auditor and the auditor is not prohibited
by law or regulation from referring to the predecessor auditor’s
report on the corresponding figures and decides to do so, the
auditor shall state in an Other Matter paragraph in the auditor’s
report:
(a) that the financial statements of the prior period were audited
by the 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.
2. The predecessor auditor’s opinion on the prior year’s financial
statements was appropriately modified. There is no requirement
for the auditor to make reference in the auditor’s report on the
current year’s financial statements to the fact that the comparative
information in the current year’s financial statements has been
restated. Paragraph A3 of CAS 710 states that when the auditor’s
report on the prior period, as previously issued, included a qualified
opinion, a disclaimer of opinion, or an adverse opinion and the
matter which gave rise to the modified opinion is resolved and
properly accounted for or disclosed in the financial statements
in accordance with the applicable financial reporting framework,
the auditor’s opinion on the current period need not refer to
the previous modification. Accordingly, the auditor would issue
a report with an unmodified opinion. In addition, the auditor
may decide to add an Other Matter paragraph referring to the
predecessor auditor’s report on the corresponding figures.
3. Although the auditor is required to obtain sufficient appropriate
audit evidence that the prior year’s closing balances have
been appropriately restated, as required by paragraph 6 of
CAS 510, Initial Audit Engagements — Opening Balances, there
is no requirement in CAS 710 for the auditor to explain in the
auditor’s report that the adjustments made to the corresponding
figures have been audited. However, the auditor may consider
it appropriate to include a statement along the following
lines: “We audited the adjustments described in Note X to the
financial statements that were applied to restate the comparative
information for the year ended December 31, 2010. In our opinion,
such adjustments are appropriate and have been properly
applied.” Such a statement might be added by including it in a new
paragraph (perhaps titled “Restated Comparative Information”)
or including it in the Other Matter paragraph referring to the
predecessor auditor, if any. The statement is consistent with the
example wording included in paragraph A11 of CAS 710.
4. As discussed in paragraph 2 of Illustrative Report 7(s), the auditor
may consider it necessary to alert readers by using an Emphasis of
Matter paragraph that the comparative information in the financial
statements has been restated (see, for example, Illustrative Report
7(n)).
7(u) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationQualified Opinion in Prior Year — Same Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor’s report on the prior year, as previously issued,
included a qualified opinion because the entity did not depreciate
property, plant and equipment as required by Canadian accounting
standards for private enterprises. The entity has decided to
depreciate property, plant and equipment as required by Canadian
accounting standards for private enterprises with retrospective
application.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated.
• The auditor’s opinion on the prior year financial statements in
connection with the current year’s audit (an unmodified opinion)
differs from the opinion the auditor previously expressed (a
qualified opinion). Accordingly, an Other Matter paragraph is
required referring to the fact that the auditor’s opinion on the
prior year financial statements differs from the opinion previously
expressed. The auditor has also decided to add an Emphasis of
Matter paragraph referring to the note to the financial statements
explaining that comparative financial information has been
restated. Because both paragraphs are interrelated, the auditor has
decided to combine the paragraphs into one paragraph entitled
“Restated Comparative Information”.
• The audit is conducted in accordance with Canadian Auditing
Standards
(Please read Introduction to Illustrative Reports)
1. Paragraph 16 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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.
2. CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report, requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
In such a circumstance, the auditor may include an Emphasis of
Matter paragraph to alert readers that the comparative information
in the financial statements has been restated, along the following
lines: “Without modifying our opinion, we draw attention to Note X
to the financial statements, which explains that certain comparative
information for the [period ended] has been restated.” Such
wording is consistent with other Illustrative Reports in this Guide
(see, for example, Illustrative Report 7(n)).
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheets as at December 31,
2011 and 2010, and the statements of income, retained earnings and
cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011 and 2010 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian accounting standards
for private enterprises.
Restated Comparative Information
Without modifying our opinion, we draw attention to Note X to
the financial statements, which explains that certain comparative
information for the year ended December 31, 2010 has been restated to
record depreciation not previously recorded.
In our report dated March 20, 2011, our opinion on the financial
statements of ABC Company for the year ended December 31,
2010 contained a qualified opinion because ABC Company did not
depreciate property, plant and equipment as required by Canadian
accounting standards for private enterprises. Accordingly, our opinion
on the financial statements for the year ended December 31, 2010
expressed in that report is different from that expressed on those
financial statements in this report because of the restatement of
comparative information.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(v) — Comparative Financial Statements
Financial Statements with Restated Comparative InformationQualified Opinion in Prior Year — Predecessor Auditor for Prior Year
Report illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The financial statements for the prior year were audited by a
predecessor auditor.
• The predecessor auditor’s report on the prior year, as previously
issued, included a qualified opinion because the entity did not
depreciate property, plant and equipment as required by Canadian
accounting standards for private enterprises. The entity has
decided to depreciate property, plant and equipment as required
by Canadian accounting standards for private enterprises with
retrospective application.
• The previously issued financial statements for the prior year were
not amended (i.e., they were not restated and reissued).
• The comparative information has been restated in the current
year’s financial statements. A note to the financial statements
explains the restatement.
• The predecessor auditor’s report on the prior year’s financial
statements was not reissued with the current year’s financial
statements.
• An Other Matter paragraph is required referring to the predecessor
auditor’s report on the prior year’s financial statements.
• The auditor has obtained sufficient appropriate audit evidence that
the prior year’s closing balances have been appropriately restated,
as required by paragraph 6 of CAS 510, Initial Audit Engagements
— Opening Balances.
• The auditor was engaged to report as to the appropriateness of
the restatement. Accordingly, the auditor expanded the Other
Matter paragraph for additional explanation indicating that the
auditor audited the adjustments that were applied to restate the
comparative financial statements. The paragraph has been entitled
“Restated Comparative Information”.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 17 of CAS 710, Comparative Information —
Corresponding Figures and Comparative Financial Statements,
states that 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:
(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.
2. Paragraph A11 of CAS 710 states that 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 an Other Matter paragraph indicating that the auditor
was so engaged.
3. Excerpt from the predecessor auditor’s report on the financial
statements of ABC Company for the year ended December 31,
2010:
Basis for Qualified Opinion
As discussed in Note X to the financial statements, no depreciation
has been provided in the financial statements, which constitutes
a departure from Canadian accounting standards for private
enterprises. This is the result of a decision taken by management
at the start of the financial year. Based on the straight-line method
of depreciation and annual rates of 5% for the building and 20% for
the equipment, the loss for the year should be increased by $xxx,
property, plant and equipment should be reduced by accumulated
depreciation of $xxx, and retained earnings should be decreased
by $xxx.
4. As discussed in paragraph 2 of Illustrative Report 7(u), the auditor
may consider it necessary to alert readers by using an Emphasis
of Matter paragraph that the comparative information in the
financial statements has been restated. This has not been done
in this Illustrative Report because the information that would be
included in such a paragraph is already included in the Restated
Comparative Information paragraph. A separate Emphasis of
Matter paragraph would be of limited value.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011 and the results of its operations and its cash flows for the year
then ended in accordance with Canadian accounting standards for
private enterprises.
Restated Comparative Information
The financial statements of ABC Company for the year ended
December 31, 2010 (prior to the restatement of the comparative
information described in Note X to the financial statements) were
audited by another auditor who expressed a qualified opinion on
those financial statements on March 31, 2011 because no depreciation
had been provided in the financial statements, which constituted a
departure from Canadian accounting standards for private enterprises.
As part of our audit of the financial statements of ABC Company for
the year ended December 31, 2011, we also audited the adjustments
described in Note X that were applied to restate the financial
statements for the year ended December 31, 2010. 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 financial
statements of ABC Company for the year ended December 31, 2010
other than with respect to the adjustments and, accordingly, we do
not express an opinion or any other form of assurance on the financial
statements for the year ended December 31, 2010 taken as a whole.
[Auditor’s signature]
[Date of the auditor’s report]
[Auditor’s address]
7(w) — Corresponding Figures
Reissued Financial Statements — Same Auditor for Prior YearReport illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011 are
prepared in accordance with Canadian accounting standards for
private enterprises.
• The auditor is required to report only on the current year financial
statements.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor obtained audit evidence that a material misstatement
exists in the prior year financial statements on which an unmodified
opinion has previously been expressed.
• This fact became known to the auditor after the financial
statements were issued that, had it been known to the auditor at
the date of the auditor’s report, would have caused the auditor to
amend the auditor’s report.
• Management amended and reissued the financial statements,
including a note to the financial statements entitled “Amended
Financial Statements” that describes the reason for the amendment
of the previously issued financial statements, and the auditor
issued an amended auditor’s report.
• The amended auditor’s report included an additional date
restricted to the amendment to the financial statements.
• An Emphasis of Matter or Other Matter paragraph is required
referring to a note to the financial statements that more extensively
discusses the reason for the amendment of the previously issued
financial statements and to the earlier report provided by the
auditor.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 12 of CAS 560, Subsequent Events, states that where
law, regulation or the financial reporting framework does not
prohibit management from restricting the amendment of the
financial statements to the effects of the subsequent event
or events causing that amendment and those responsible for
approving the financial statements are not prohibited from
restricting their approval to that amendment, the auditor is
permitted to restrict the audit procedures on subsequent events
required in paragraph 11(b)(i) of CAS 560 to that amendment. In
such cases, the auditor shall either:
(a) amend the auditor’s report to include an additional date
restricted to that amendment that thereby indicates that the
auditor’s procedures on subsequent events are restricted solely
to the amendment of the financial statements described in the
relevant note to the financial statements; or
(b) provide a new or amended auditor’s report that includes a
statement in an Emphasis of Matter paragraph or Other Matter
paragraph that conveys that the auditor’s procedures on
subsequent events are restricted solely to the amendment of
the financial statements as described in the relevant note to
the financial statements.
2. In this Illustrative Report, it has been assumed that law,
regulation or the financial reporting framework does not prohibit
management from restricting the amendment of the financial
statements to the effects of the subsequent event or events
causing that amendment and those responsible for approving
the financial statements are not prohibited from restricting their
approval to that amendment.
3. Paragraph 14 of CAS 560 states that if, after the financial
statements are issued, a fact becomes known to the auditor that,
had it been known to the auditor at the date of the auditor’s report,
may have caused the auditor to amend the auditor’s report, the
auditor shall:
(a) Discuss the matter with management and, where appropriate,
those charged with governance;
(b) Determine whether the financial statements need amendment;
and, if so,
(c) Inquire how management intends to address the matter in the
financial statements.
4. Paragraph 15 of CAS 560 states that if management amends the
financial statements, the auditor shall:
(a) carry out the audit procedures necessary in the circumstances
on the amendment.
(b) review the steps taken by management to ensure that anyone
in receipt of the previously issued financial statements together
with the auditor’s report thereon is informed of the situation.
(c) unless the circumstances in paragraph 12 apply:
(i) extend the audit procedures referred to in paragraphs 6
and 7 of CAS 560 to the date of the new auditor’s report,
and date the new auditor’s report no earlier than the date
of approval of the amended financial statements; and
(ii) provide a new auditor’s report on the amended financial
statements.
(d) when the circumstances in paragraph 12 apply, amend the
auditor’s report or provide a new auditor’s report as required
by paragraph 12.
5. Paragraph 16 of CAS 560 requires the auditor to include in the
new or amended auditor’s report an Emphasis of Matter paragraph
or Other Matter paragraph referring to a note to the financial
statements that more extensively discusses the reason for the
amendment of the previously issued financial statements and to
the earlier report provided by the auditor.
6. Paragraph A12 of CAS 560 states that when, in the circumstances
described in paragraph 12(a), the auditor amends the auditor’s
report to include an additional date restricted to that amendment,
the date of the auditor’s report on the financial statements prior to
their subsequent amendment by management remains unchanged
because this date informs the reader as to when the audit work on
those financial statements was completed. However, an additional
date is included in the auditor’s report to inform users that the
auditor’s procedures subsequent to that date were restricted to the
subsequent amendment of the financial statements.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the balance sheet as at December 31, 2011,
and the statements of income, retained earnings and cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with Canadian accounting
standards for private enterprises, and for such internal control as
management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011, and the results of its operations and its cash flows for the year
then ended in accordance with Canadian accounting standards for
private enterprises.
Amended Financial Statements
Without modifying our opinion, we draw attention to Note X to the
financial statements, which explains that the financial statements for
the year ended December 31, 2011 have been amended from those on
which we originally reported on March 20, 2012.
[Auditor’s signature]
March 20, 2012, except as to Note X, which is as of April 15, 2012
[Auditor’s address]
7(x) — Comparative Financial Statements
Reissued Financial Statements — Same Auditor for Prior YearReport illustrative of the following circumstances:
• The financial statements for the year ended December 31, 2011
are prepared in accordance with International Financial Reporting
Standards.
• The auditor is required to report on each year for which financial
statements are presented and on which an audit opinion is
expressed.
• The auditor for the current year was also the auditor for the prior
year.
• The auditor obtained audit evidence that a material misstatement
exists in the prior year financial statements on which an
unmodified opinion has previously been expressed.
• This fact became known to the auditor after the financial
statements were issued that, had it been known to the auditor at
the date of the auditor’s report, may have caused the auditor to
amend the auditor’s report.
• Management amended and reissued the financial statements,
referring to them as “Amended Financial Statements”, and the
auditor issued an amended auditor’s report.
• An Emphasis of Matter or Other Matter paragraph is required
referring to a note to the financial statements that more extensively
discusses the reason for the amendment of the previously issued
financial statements and to the earlier report provided by the
auditor.
• The audit is conducted in accordance with Canadian Auditing
Standards.
(Please read Introduction to Illustrative Reports)
1. Paragraph 12 of CAS 560, Subsequent Events, states that where
law, regulation or the financial reporting framework does not
prohibit management from restricting the amendment of the
financial statements to the effects of the subsequent event
or events causing that amendment and those responsible for
approving the financial statements are not prohibited from
restricting their approval to that amendment, the auditor is
permitted to restrict the audit procedures on subsequent events
required in paragraph 11(b)(i) of CAS 560 to that amendment. In
such cases, the auditor shall either:
(a) amend the auditor’s report to include an additional date
restricted to that amendment that thereby indicates that the
auditor’s procedures on subsequent events are restricted solely
to the amendment of the financial statements described in the
relevant note to the financial statements; or
(b) provide a new or amended auditor’s report that includes a
statement in an Emphasis of Matter paragraph or Other Matter
paragraph that conveys that the auditor’s procedures on
subsequent events are restricted solely to the amendment of
the financial statements as described in the relevant note to
the financial statements.
2. In this Illustrative Report, it has been assumed that law, regulation
or the financial reporting framework does prohibit management
from restricting the amendment of the financial statements to the
effects of the subsequent event or events causing that amendment
and those responsible for approving the financial statements are
prohibited from restricting their approval to that amendment.
3. Paragraph 14 of CAS 560 states that if, after the financial
statements are issued, a fact becomes known to the auditor that,
had it been known to the auditor at the date of the auditor’s report,
may have caused the auditor to amend the auditor’s report, the
auditor shall:
(a) discuss the matter with management and, where appropriate,
those charged with governance;
(b) determine whether the financial statements need amendment;
and, if so,
(c) inquire how management intends to address the matter in the
financial statements.
4. Paragraph 15 of CAS 560 states that if management amends the
financial statements, the auditor shall:
(a) carry out the audit procedures necessary in the circumstances
on the amendment.
(b) review the steps taken by management to ensure that anyone
in receipt of the previously issued financial statements together
with the auditor’s report thereon is informed of the situation.
(c) unless the circumstances in paragraph 12 apply:
(i) extend the audit procedures referred to in paragraphs 6 and
7 of CAS 560 to the date of the new auditor’s report, and
date the new auditor’s report no earlier than the date of
approval of the amended financial statements; and
(ii) provide a new auditor’s report on the amended financial
statements.
(d) when the circumstances in paragraph 12 apply, amend the
auditor’s report or provide a new auditor’s report as required
by paragraph 12.
5. Paragraph 16 of CAS 560 requires the auditor to include in the
new or amended auditor’s report an Emphasis of Matter paragraph
or Other Matter paragraph referring to a note to the financial
statements that more extensively discusses the reason for the
amendment of the previously issued financial statements and to
the earlier report provided by the auditor.
INDEPENDENT AUDITOR’S REPORT
[Appropriate Addressee]
We have audited the accompanying financial statements of ABC
Company, which comprise the statements of financial position as at
December 31, 2011 and 2010, and the statements of comprehensive
income, statements of changes in equity and statements of cash flows
for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of ABC Company as at December 31,
2011 and 2010, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting
Standards.
Amended Financial Statements
Without modifying our opinion, we draw attention to Note X to the
financial statements, which explains that the financial statements for
the year ended December 31, 2011 have been amended from those on
which we originally reported on March 20, 2012.
[Auditor’s signature]
April 15, 2012
[Auditor’s address]
Jika Anda menyukai Artikel di blog ini, Silahkan
klik disini untuk berlangganan gratis via email, Anda akan mendapat kiriman artikel setiap ada artikel yang terbit di Our Akuntansi
0 komentar:
Post a Comment