TWSA705 Modifications to the Opinion in the Independent Auditor’s Report

Status

Revised by Auditing Standards Committee in Taiwan on 4 October, 2022

Summary

This Statement deals with the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with TWSA700, the auditor concludes that a modification to the auditor’s opinion on the financial statements is necessary. This Standard also deals with how the form and content of the auditor’s report is affected when the auditor expresses a modified opinion.

This Standard establishes three types of modified opinions, namely, a qualified opinion, an adverse opinion, and a disclaimer of opinion. The decision regarding which type of modified opinion is appropriate depends upon the nature of the matter giving rise to the modification and the auditor’s judgment about the pervasiveness of the effects or possible effects of the matter on the financial statements.

The auditor shall express a qualified opinion when:

(a) The auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or

(b) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.

The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

The auditor shall disclaim an opinion when :

(a) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.

(b) In extremely rare circumstances involving multiple uncertainties, the auditor concludes that, notwithstanding having obtained sufficient appropriate audit evidence regarding each of the individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential interaction of the uncertainties and their possible cumulative effect on the financial statements.

When the auditor modifies the audit opinion, the auditor shall use the heading “Qualified Opinion,”“Adverse Opinion,” or “Disclaimer of Opinion,” as appropriate, for the Opinion section; in addition, the auditor shall amend the heading “Basis for Opinion” required by TWSA700 to“Basis for Qualified Opinion,” “Basis for Adverse Opinion,” or “Basis for Disclaimer of Opinion,” as appropriate, and include a description of the matter giving rise to the modification within this section.

In addition to the specific elements required by TWSA700, the auditor shall amend the heading and include a description of the matter giving rise to the modification within Basis for Opinion section when the auditor modifies the opinion on the financial statements.

Unless required by law or regulation, when the auditor disclaims an opinion on the financial statements, the auditor’s report shall not include a Key Audit Matters section.

When the auditor expects to modify the opinion in the auditor’s report, the auditor shall communicate with those charged with governance the circumstances that led to the expected modification and the wording of the modification.

Effective date

This Standard is effective from 15 December, 2022.