Is this Audit report correct?

Question

This audit is for a private corporation with the following issues: No statement of cash flows, change method of accounting for long-term contracts restating prior years, debentures issued restricting future cash dividends to earnings.

My report contains theses paragraphs:
1. Introductory, excluding cash flow
2. Scope paragraph- no changes
3. Disclosure paragraph-debentures
4. Lack of statement of CF
5. Opinion- except for above 2 paragraphs
6. explanatory paragraph- change in method of accounting

Is this one too many paraphraphs for a report of this type or does it appear correct.

Answer 1

It depends on what was already disclosed in the notes to the financial statements.

The omission of the cash flow statement definitely deserves a qualification. This is not in compliance with IAS 7.

If they have had a change in a/cg policy regarding the L-T contracts, they should do a retrospective adjustment, restating comparatives, which they have done. If all the necessary notes are in the financial statements, that should be enough. You do not qualify the a/cs on this matter.

Issue of debentures - again, if all the necessary disclosures are in the notes, that's enough. You don't qualify this either.

Before you qualify something, you have to ask yourself - which standard have they not complied with?

Answer 2

Based on ISA 700, Audit Report includes:

(a) Title;
(b) Addressee;
(c) Introductory paragraph;
(d) Management’s responsibility for the financial statements;
(e) Auditor’s responsibility;
(f) Auditor’s opinion;
(g) Other reporting responsibilities;
(h) Auditor’s signature;
(i) Date of the auditor’s report; and
(j) Auditor’s address.

I think your audit report seemed complete enough. I'm not sure about the explanatory paragraph you added though - if it should form part of your audit report.

Answer 3

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