IAASB Main Meeting (September 2014)

Illustration 1 – Unmodified Opinion When a Material Uncertainty Exists. Disclosure in the Financial
Statements Is Adequate and a Going Concern Section is included in the Auditor’s Report
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
• Audit of a complete set of financial statements of a listed entity using a fair presentation framework.
The audit is not a group (i.e., ISA 6001 does not apply).
• The financial statements are prepared by management of the entity in accordance with IFRSs (a
general purpose reporting framework).
• The terms of the audit engagement reflect the description of management’s responsibility for the
financial statements in ISA 210 2.
• The auditor has concluded an unmodified (i.e., “clean”) opinion is appropriate based on the audit
evidence obtained.
• The relevant ethical requirements that apply to the audit of the financial statements are those of
the jurisdiction
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty exists
related to events or conditions that may cast doubt on the entity’s ability to continue as a going
concern. The disclosure of the material uncertainty in the financial statements is adequate.
• Key audit matters have been communicated in accordance with proposed ISA 701.
• Other information has been obtained at the date of the auditor’s report (i.e., proposed ISA 720
(Revised) applies).
• Those responsible for oversight of the financial statements differ from those responsible for the
preparation of the financial statements.

• In addition to the audit of the financial statements, the auditor has other reporting responsibilities
required under local law.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ABC Company [or Other Appropriate Addressee]

Report on the Audit of the Financial Statements 3

Opinion
We have audited the financial statements of ABC Company, (the Company) which comprise the statement of
financial position as at December 31, 20X1, and the statement of comprehensive income, statement of changes
in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, (or give a true and
fair view of) the financial position of the Company as at December 31, 20X1, and (of) its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting Standards
(IFRSs).

1
ISA 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors
2
ISA 210, Agreeing the Terms of Audit Engagements
3
The sub-title “Report on the Audit of the Financial Statements” is unnecessary in circumstances when the second sub-title “Report
on Other Legal and Regulatory Requirements” is not applicable.
 IAASB Main Meeting (September 2014)

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements
section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in [jurisdiction] and have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Going Concern Section

Material Uncertainty Relating to Going Concern
We draw attention to Note 6 in the financial statements, which indicates that the Company incurred a net loss of
ZZZ during the year ended December 31, 20X1 and, as of that date, the Company’s current liabilities exceeded
its total assets by YYY. As stated in Note 6, these events or conditions, along with other matters as set forth in
Note 6, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.

Going Concern Basis of Accounting

The Company’s financial statements have been prepared using the going concern basis of accounting.
Management is responsible for assessing the Company’s ability to continue as a going concern, including
whether the use of the going concern basis of accounting is appropriate. The use of the going concern
basis of accounting is appropriate unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so. Management is also responsible for disclosing [in
the financial statements] a material uncertainty of which management becomes aware related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.

As part of our audit, we conclude regarding the appropriateness of management’s use of the going concern
basis of accounting in the preparation of the financial statements in the context of the applicable financial
reporting framework. We also conclude, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in the auditor’s report to the disclosures in the financial statements about the material uncertainty
or, if such disclosures are inadequate, to modify the opinion on the financial statements. Our conclusions
are based on information available to us at the date of the auditor’s report. However, future events or
conditions may cause an entity to cease to continue as a going concern.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, but we do not provide a basis for a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
Concern section of our report, we have determined the matters described below to be the key audit matters to
be communicated in our report.
[Description of each key audit matter in accordance with proposed ISA 701.]
 IAASB Main Meeting (September 2014)

Other Information [or another title if appropriate such as “Information Other than the Financial
Statement and the Auditor’s Report Thereon]
[Reporting in accordance with proposed ISA 720 – see illustration 1 in proposed ISA 700 (Revised).]

Responsibilities of Management4 and Those Charged with Governance for the Financial Statements
With respect to these financial statements, management is responsible for their preparation and fair
presentation in accordance with IFRSs, 5 and such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
[Those charged with governance] are responsible for overseeing the Company’s financial reporting
process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
The shaded material below can be located in an Appendix to the auditor’s report. When law, regulation or national auditing standards
expressly permit, reference can be made to a website of an appropriate authority that contains the description of the auditor’s
responsibilities, rather than including this material in the auditor’s report, provided that the description on the website is not inconsistent
with the description of the auditor’s responsibilities below.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control.6
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

4
Throughout the illustrative auditor’s reports in the Proposed ISAs, the term management may need to be replaced by another
term that is appropriate in the context of the legal framework in the particular jurisdiction. For example, those charged with
governance, rather than management, may have these responsibilities.
5
Where management’s responsibility is to prepare financial statements that give a true and fair view, this may read: “Management
is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial
Reporting Standards, and for such ...”
6
This sentence would be modified, as appropriate, in circumstances when the auditor also has responsibility to issue an opinion
on the effectiveness of internal control in conjunction with the audit of the financial statements.
 IAASB Main Meeting (September 2014)

• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We are required to communicate with [those charged with governance] regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We are also required to provide [those charged with governance] with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with [those charged with governance], we are required to determine those
matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We are required to describe these matters in our auditor’s report unless
law or regulation preclude public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter that has not otherwise been publicly disclosed should not be communicated in our report
in view of the significance of the adverse consequences that can reasonably be expected to arise as a result of
such communication.

Report on Other Legal and Regulatory Requirements

[The form and content of this section of the auditor’s report would vary depending on the nature of the auditor’s
other reporting responsibilities prescribed by local law, regulation, or national auditing standards. The matters
addressed by other law, regulation or national auditing standards (referred to as “other reporting responsibilities”)
shall be addressed within this section unless the other reporting responsibilities address the same topics as
those presented under the reporting responsibilities required by the ISAs as part of the Report on the Audit of
the Financial Statements section. The reporting of other reporting responsibilities that address similar topics as
those required by the ISAs may be combined (i.e., included in the Report on the Audit of the Financial Statements
section under the appropriate subheadings) provided that the wording in the auditor’s report clearly differentiates
the other reporting responsibilities from the reporting that is required by the ISAs where such a difference exists.]
The engagement partner on the audit resulting in this independent auditor’s report is [name].
[Signature in the name of the audit firm, the personal name of the auditor, or both, as appropriate for the
particular jurisdiction]
[Auditor Address]
[Date]