Document ID: chunk:federal_register_of_legislation:F2023C01136:reg:9:p7
Version: federal_register_of_legislation:F2023C01136
Segment Type: reg
Provision Reference: reg 9 (pt 7/24)
Character Range: 23267–26252

report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation.  ASA 705 addresses circumstances in which the auditor concludes that there is a material misstatement relating to the appropriateness or adequacy of disclosures in the financial report.[10]

A6.             When the auditor expresses a qualified or adverse opinion in accordance with ASA 705, presenting the description of a matter giving rise to a modified opinion in the Basis for Qualified (Adverse) Opinion section helps to promote intended users' understanding and to identify such circumstances when they occur.  Separating the communication of this matter from other key audit matters described in the Key Audit Matters section therefore gives it the appropriate prominence in the auditor's report (see paragraph 15).  The Appendix in ASA 705 includes illustrative examples of how the introductory language in the Key Audit Matters section is affected when the auditor expresses a qualified or adverse opinion and other key audit matters are communicated in the auditor's report.  Paragraph A58 illustrates how the Key Audit Matters section is presented when the auditor has determined that there are no other key audit matters to be communicated in the auditor's report beyond matters addressed in the Basis for Qualified (Adverse) Opinion section or Material Uncertainty Related to Going Concern section of the auditor's report.

A7.             When the auditor expresses a qualified or adverse opinion, communicating other key audit matters would still be relevant to enhancing intended users' understanding of the audit, and therefore the requirements to determine key audit matters apply.  However, as an adverse opinion is expressed in circumstances when the auditor has concluded that misstatements, individually or in the aggregate, are both material and pervasive to the financial report:[11]

           * Depending on the significance of the matter(s) giving rise to an adverse opinion, the auditor may determine that no other matters are key audit matters.  In such circumstances, the requirement in paragraph 15 applies (see paragraph A58).

           * If one or more matters other than the matter(s) giving rise to an adverse opinion are determined to be key audit matters, it is particularly important that the descriptions of such other key audit matters do not imply that the financial report as a whole are more credible in relation to those matters than would be appropriate in the circumstances, in view of the adverse opinion (see paragraph A47).

A8.             ASA 706[12] establishes mechanisms for auditors of financial reports of all entities to include additional communication in the auditor's report through the use of Emphasis of Matter paragraphs and Other Matter paragraphs when the auditor considers it necessary to do so.  In such cases, these paragraphs are presented separately from the Key