Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
The audi<strong>to</strong>r’s report would not refer <strong>to</strong> the work of an expert. Such a reference might be misunders<strong>to</strong>od <strong>to</strong> be
a modification of the audi<strong>to</strong>r’s opinion or a division of responsibility, neither of which is intended.
However, if the audi<strong>to</strong>r decides <strong>to</strong> issue a modified audi<strong>to</strong>r’s report as a result of the expert’s involvement, it
may be appropriate, in explaining the nature of the modification, <strong>to</strong> refer <strong>to</strong> or describe the work of the expert,
including the identity of the expert and the extent of the expert’s involvement). In these circumstances, the
audi<strong>to</strong>r would obtain the permission of the expert before making such a reference. If permission is refused and
the audi<strong>to</strong>r believes a reference is necessary, the audi<strong>to</strong>r may need <strong>to</strong> seek legal advice.
15.9 ISA 720—Other Information in Documents Containing Audited Financial Statements
Paragraph #
ISA Objective(s)
720.4 The objective of the audi<strong>to</strong>r is <strong>to</strong> respond appropriately when documents containing audited
financial statements and the audi<strong>to</strong>r’s report thereon include other information that could
undermine the credibility of those financial statements and the audi<strong>to</strong>r’s report.
Paragraph #
Relevant Extracts from ISAs
720.6 The audi<strong>to</strong>r shall read the other information <strong>to</strong> identify material inconsistencies, if any, with the
audited financial statements.
720.7 The audi<strong>to</strong>r shall make appropriate arrangements with management, or those charged with
governance, <strong>to</strong> obtain the other information prior <strong>to</strong> the date of the audi<strong>to</strong>r’s report. If it is not
possible <strong>to</strong> obtain all the other information prior <strong>to</strong> the date of the audi<strong>to</strong>r’s report, the audi<strong>to</strong>r
shall read such other information as soon as practicable. (Ref: Para. A5)
720.8 If, on reading the other information, the audi<strong>to</strong>r identifies a material inconsistency, the audi<strong>to</strong>r shall
determine whether the audited financial statements or the other information needs <strong>to</strong> be revised.
720.9 If revision of the audited financial statements is necessary and management refuses <strong>to</strong> make the
revision, the audi<strong>to</strong>r shall modify the opinion in the audi<strong>to</strong>r’s report in accordance with ISA 705.
720.10 If revision of the other information is necessary and management refuses <strong>to</strong> make the revision,
the audi<strong>to</strong>r shall communicate this matter <strong>to</strong> those charged with governance, unless all of
those charged with governance are involved in managing the entity; and
(a) Include in the audi<strong>to</strong>r’s report an Other Matter paragraph describing the material
inconsistency in accordance with ISA 706;
(b) Withhold the audi<strong>to</strong>r’s report; or
(c) Withdraw from the engagement, where withdrawal is possible under applicable law or
regulation. (Ref: Para. A6-A7)
720.11 If revision of the audited financial statements is necessary, the audi<strong>to</strong>r shall follow the relevant
requirements in ISA 560.
720.12 If revision of the other information is necessary and management agrees <strong>to</strong> make the revision,
the audi<strong>to</strong>r shall carry out the procedures necessary under the circumstances. (Ref: Para. A8)
720.13 If revision of the other information is necessary, but management refuses <strong>to</strong> make the revision,
the audi<strong>to</strong>r shall notify those charged with governance, unless all of those charged with
governance are involved in managing the entity, of the audi<strong>to</strong>r’s concern regarding the other
information and take any further appropriate action. (Ref: Para. A9)