If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should indicate in the introductory paragraph of his or her report (a) that the financial statements of the prior period were audited by another
auditor, fn 29 (b) the date of his or her report, (c) the type of report issued by the predecessor auditor, and (d) if the report was other than a standard report, the substantive reasons therefor.
fn 30 An example of a successor auditor's report when the predecessor auditor's report is not presented is shown below: Independent Auditor's Report We have audited the balance sheet of ABC Company as of December 31, 20X2, and the
related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of ABC Company as of December 31, 20X1, were audited by other auditors whose report dated March 31, 20X2, expressed an unqualified opinion on those statements. [Same second paragraph as the standard
report] In our opinion, the 20X2 financial statements referred to above present fairly, in all material respects, the financial position of ABC Company as of December 31, 20X2, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. If the predecessor auditor's report was other than a standard report, the successor auditor should describe the nature of
and reasons for the explanatory paragraph added to the predecessor's report or the opinion qualification. Following is an illustration of the wording that may be included in the successor auditor's report: . . . were audited by other auditors whose report dated March 1, 20X2, on those statements included an explanatory paragraph that described the change in the Company's method of computing depreciation discussed in Note X to the financial statements. If the
financial statements have been restated, the introductory paragraph should indicate that a predecessor auditor reported on the financial statements of the prior period before restatement. In addition, if the successor auditor is engaged to audit and applies sufficient procedures to satisfy himself or herself as to the appropriateness of the restatement adjustments, he or she may also include the following paragraph in his report: We also audited the adjustments described in
Note X that were applied to restate the 20X1 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. [Paragraph renumbered and amended, effective for reports issued or reissued on or after February 29, 1996, by the issuance of Statement on Auditing Standards No. 79.] SA 710 deals with the responsibilities of an auditor with respect to comparative information in the audit of the financial statements. IntroductionWhen the audit of prior period financial statements has been executed by a predecessor auditor or the financial statements weren’t audited, the guidance and requirements in SA 5103 concerning opening balances are also applicable. Nature of Comparative InformationThe nature of the comparative information which is presented in financial statements of the entity is governed by the requirements of relevant financial reporting framework. The two approaches to the reporting responsibilities of an auditor in respect of comparative information include:
The approach which needs to be adopted by an auditor is often stipulated by regulation or law, however, it might also be prescribed in the terms of engagement. The key audit reporting differences between the approaches are:
ObjectivesThe objectives of the auditor are: i) To obtain sufficient appropriate audit evidence about whether the comparative information included in the financial statements has been presented, in all material respects, in accordance with the requirements for comparative information in the applicable financial reporting framework ii) To report in accordance with the auditor’s reporting responsibilities. Audit ProceduresAn auditor should consider whether financial statements comprises comparative information which are required by relevant financial reporting framework and whether the information so required are classified appropriately. For this purpose, an auditor should assess whether:
Audit ReportingCorresponding FiguresWhen the corresponding figures are presented, the opinion of an auditor shouldn’t refer to corresponding figures barring the following circumstances:
For the circumstances mentioned in the aforesaid point (1), the auditor should modify his/her audit opinion on financial statements of the current period. In Basis for Modification paragraph in his/her audit report, the auditor should either: a) Refer to current period as well as the corresponding figures in the description of the matter requiring modification when effects or likely effects of such matter on the figures of the current period are material. OR b) The auditor in other cases should explain that his/her audit opinion has been modified due to the effects or likely effects of an unresolved matter on comparability of figures of the existing period and such corresponding figures. I. Prior Period Financial Statements Audited by a Predecessor Auditor In case the audit of prior period financial statements was performed by a predecessor auditor and the law or regulation permits auditor to refer to the report of the predecessor auditor on corresponding figures and the auditor decides to do so, he/she should state in the Other Matter paragraph in his/her audit report a) That the audit of prior period financial statements was performed by a predecessor auditor b) Type of opinion which was expressed by such predecessor auditor and, in case such opinion was modified, the reasons for the same c) The date of such report II. Prior Period Financial Statements Not Audited In case the audit of financial statements of the prior period didn’t happen, the auditor should state the same in another matter paragraph in his/her audit report that such corresponding figures are unaudited. However, such a statement doesn’t relieve an auditor from his duty of obtaining sufficient adequate audit evidence that opening balances are free of material misstatements which affect the financial statements of the current period. Comparative Financial StatementsWhen the comparative financial statements are presented, each period for which such financial statements are presented and audit opinion is expressed should be referred for auditor’s opinion. When reporting on financial statements of a prior period in connection with audit of the current period, if the opinion of the auditor on the financial statements of prior period differs from the opinion expressed by the auditor previously, the auditor should disclose applicable reasons for such different opinion in the Other Matter paragraph as per SA 7068. I. Prior Period Financial Statements Audited by a Predecessor Auditor In case the audit of prior period financial statements was performed by a predecessor auditor, along with expressing the opinion on financial statements of the current period, the auditor should mention in the Other Matter paragraph: a) That the audit of prior period financial statements was performed by a predecessor auditor b) The type of opinion that was expressed by such predecessor auditor and, in case the opinion was modified, the reasons for the same c) The date of such report unless the report of predecessor auditor on financial statements of the prior period is revised with financial statements. II. Prior Period Financial Statements Not Audited In case audit of the financial statements of the prior period was not performed, the auditor should mention it in the Other Matter paragraph that such comparative financial statements are unaudited. However, such a statement doesn’t relieve an auditor from his duty of obtaining sufficient adequate audit evidence that opening balances are free of material misstatements which affect the financial statements of the current period.
 File your returns in just 3 minutes 100% pre-fill. No manual data entry When reporting on comparative financial statements auditors ordinarily should modify the previous opinion on the prior year's financial statements if the?When reporting on comparative financial statements an auditor ordinarily should change the previously issued opinion of the prior year's financial statements if what? prior year's financial statements are restated to conform with an applicable financial reporting framework.
What is the auditor responsibility when noncompliance?The auditor is responsible for obtaining reasonable assurance that material misstatements in the financial statements are detected whether those misstatements are due to fraud or error.
When should audited financial statements be submitted?Requirement to submit annual financial statements
(1) Each year, a company must prepare annual financial statements within six months after the end of its financial year, or such shorter period as may be appropriate to provide the required notice of an annual general meeting in terms of section 61(7).
What may the auditor do if the preconditions for an audit are not present?If the preconditions for an audit are not present, the auditor shall discuss the matter with management; if the preconditions for the audit are still not present after the discussion, the auditor shall not accept the proposed audit engagement.
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When the financial statements of the prior period were not audited, the incoming auditor should
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