Materiality, Misstatements and
Reporting – Part III
ISA Implementation Support Module
Prepared by IAASB Staff
October 2010
Overview of Module
(Old)
ISA 320
(Revised)
ISA 320
(Old)
ISA 700
(New)
ISA 450
(Amended)
ISA 700
2
Overview of Significant Amendments to ISA 700
• Evaluation of whether the financial statements
as a whole are free from material misstatements,
and consideration of management bias
• Forming more than one opinion when the
financial statements are prepared in accordance
with two financial reporting frameworks
• Description of management’s responsibility for
the financial statements in the auditor’s report
3
Scope of ISA 700 relative to ISAs 800 and 805
Complete f/s prepared in
accordance with a general
purpose framework
ISA
700
Complete f/s prepared in
accordance with a special
purpose framework
ISA
800
Single f/s or specific
element, account or item
of a f/s
ISA
805
Framework may be
fair presentation or
compliance
framework
Framework may be
based on either a
general purpose or
special purpose
framework, either of
which may be either
a fair presentation or
compliance
framework
4
Evaluation of Financial Statements as a Whole
• Under ISA 700, evaluation of whether financial
statements as a whole are free from material
misstatement now a step to forming the audit
opinion
• Evaluation takes into account
– Conclusion under ISA 450 as to whether uncorrected
misstatements are material, individually or in aggregate
– Qualitative aspects of entity’s accounting practices,
including indicators of possible bias in management
judgments
5
Financial Statements Prepared in Accordance with
Two Financial Reporting Frameworks
• Question of whether more than one opinion may be
expressed when management asserts that financial
statements comply with two FRFs
– E.g. national GAAP and IFRS
• Under ISA 700, two opinions may be expressed
• If financial statements represent compliance with one
framework and disclose extent of compliance with
another, express only one opinion
– The additional disclosure cannot be differentiated from
the rest of the financial statements
6
Description of Management’s Responsibility
• Describe management’s responsibility for
financial statements in the audit report as it is
described in terms of engagement
• Use wording in relevant law or regulation to
describe management’s responsibility if
equivalent in effect to wording in ISA 210
• In any other case, use wording in ISA 210 to
describe management’s responsibility in the
audit report
7
Note
This set of support slides does not amend or override
the ISAs, the texts of which alone are authoritative.
Reading the slides is not a substitute for reading the
ISAs. The slides are not meant to be exhaustive and
reference to the ISAs themselves should always be
made. In conducting an audit in accordance with
ISAs, the auditor is required to comply with all the
ISAs that are relevant to the engagement.
8
International Federation
of Accountants
Copyright © October 2010 by the International Federation of Accountants
(IFAC). All rights reserved. Permission is granted to make copies of this work
provided that such copies are for use in academic classrooms or for personal use
and are not sold or disseminated and provided that each copy bears the
following credit line: “Copyright © October 2010 by the International
Federation of Accountants (IFAC). All rights reserved. Used with permission of
IFAC. Contact permissions@ifac.org for permission to reproduce, store, or
transmit this work.” Otherwise, written permission from IFAC is required to
reproduce, store, or transmit, or to make other similar uses of, this work, except
as permitted by law. Contact permissions@ifac.org.
ISBN: 978-1-60815-078-6
www.ifac.org