Wiley Practitioner's Guide to GAAS 2022

33AU-C 705 Modifications to the Opinion in the Independent Auditor's Report

• Scope
• Definitions of Terms
• Objective of AU-C Section 705
• Requirements
  • Where Modified Opinions are Required
  • Types of Modified Opinions
  • Lack of Independence
  • Modified Opinion Format
• AU-C 705 Illustrations

SCOPE

AU-C 705 provides guidance for auditors who conclude that they must modify their opinion. (AU-C 705.01) Note that the reporting requirements of AU-C 700 and 703 apply. They are not repeated in this section. Readers should refer to the chapters on those sections for additional guidance.

DEFINITIONS OF TERMS

Source: AU-C 705.06. For definitions related to this standard, see Appendix A, “Definitions of Terms”: Modified opinion, Pervasive.

OBJECTIVE OF AU-C SECTION 705

The objective of the auditor is to express clearly an appropriately modified opinion on the financial statements that is necessary in the following circumstances:

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.

   (AU-C Section 705.05)

REQUIREMENTS

WHERE MODIFIED OPINIONS ARE REQUIRED

Circumstances may require that the auditor not express an unqualified opinion on the financial statements. A modified opinion should be issued when:

• The auditor concludes the financial statements as ...