Modified Audit Opinions

Last Revision: 6/30/2016

The wording of the modification to an auditor’s report depends upon whether you are reporting on the current period financial statements or on each period included in the financial statements (refer to Comparative Information above).

Specifically, under CAS 710.11(a)*, when a modification to the auditor’s report remains unresolved from the prior year, the qualification is required to refer to all periods included in the financial statements, even when you are reporting only on the current year. This is not uncommon when auditors are dealing with NPOs who collect significant cash revenue and are unable to obtain sufficient appropriate audit evidence in accordance with the CASs. As such, an example for a recurring audit engagement with an unresolved qualification related to completeness of revenues is:

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.

Additional Illustrative Examples Available

24 examples are included in Section 7 of the “Illustrative Reports” section of the CPA Canada Guide, Reporting Implications of New Auditing and Accounting Standards. The wording for a modified report will differ depending on a few factors:

  • Which comparative information approach is being used;
  • Whether the comparatives have been audited by another firm or are unaudited;
  • Whether comparative figures are restated; and
  • Whether the modification affects the current period, the prior period, or both.

Practitioners are encouraged to review the summary set out in the introduction of Section 7 to determine which illustrative example best describe their client’s circumstance. Practitioners might wish to review the illustrative examples in the CPA Canada Guide and update their reporting templates accordingly.

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