Wiley Practitioner's Guide to GAAS 2015: Covering all SASs, SSAEs, SSARSs, PCAOB Auditing Standards, and Interpretations

AU-C 705 Modifications to the Opinion in the Independent Auditor's Report

AU-C ORIGINAL PRONOUNCEMENTS

Original Pronouncements

Statements on Accounting Standards (SAS) 122, 123.

AU-C DEFINITIONS OF TERMS

Source: AU-C 705.06

Modified opinion. A qualified opinion, an adverse opinion, or a disclaimer of opinion.

Pervasive. A term used in the context of misstatements to describe the effects on the financial statements of misstatements or the possible effects on the financial statements of misstatements, if any, that are undetected due to an inability to obtain sufficient appropriate audit evidence. Pervasive effects on the financial statements are those that, in the auditor's professional judgment:

• Are not confined to specific elements, accounts, or items of the financial statements;
• If so confined, represent or could represent a substantial proportion of the financial statements; or
• With regard to disclosures, are fundamental to users' understanding of the financial statements.

OBJECTIVE OF AU-C SECTION 705

AU-C Section 705.05 states that:

… the objective of the auditor is to express clearly an appropriately modified opinion on the financial statements that is necessary when

1. the auditor concludes, based on the audit evidence obtained, that the financial statements as a whole are materially misstated or
2. the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement.