AG ISA (NZ) 706 Emphasis of matter paragraphs and other matter paragraphs
AG ISA (NZ) 706
THE AUDITOR-GENERAL’S STATEMENT ON
EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER
PARAGRAPHS IN THE INDEPENDENT AUDITOR’S REPORT
Contents
Page
Introduction
3 - 5001
Scope of this Statement
3 - 5001
Application
3 - 5001
Objective
3 - 5001
Definitions
3 - 5001
Requirements
3 - 5002
Matters to consider when preparing an audit report containing
an emphasis of matter or other matter paragraph
Appendix 1 - Examples of emphasis of matter and other matter paragraphs
Issued 03/14
Office of the Auditor-General
3 - 5002
3 - 5003
3 - 5000
AG ISA (NZ) 706 Emphasis of matter paragraphs and other matter paragraphs
Introduction
Scope of this Statement
1.
This Auditor-General’s Auditing Statement sets out the Auditor-General’s
requirements for issuing audit reports that contain emphasis of matter or other matter
paragraphs. Also, it provides examples (in Appendix 1) of emphasis of matter and
other matter paragraphs that are based on the requirements of:
(a)
AG ISA (NZ) 700: Forming an Opinion and Reporting on Financial and Nonfinancial Information; and
(b)
ISA (NZ) 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs
in the Independent Auditor’s Report1.
Application
2.
Compliance with this Statement is mandatory for Appointed Auditors who carry out
annual audits on behalf of the Auditor-General.
3.
This Statement applies to all annual audits with reporting periods beginning on or
after 1 July 2013, although earlier application is encouraged.
Objective
4.
The objective of the Appointed Auditor, having formed an opinion on the financial and
non-financial information, is to draw readers’ attention, when in the Appointed
Auditor’s judgement it is necessary to do so, to:
(a)
a matter that, although appropriately presented or disclosed in the financial
and non-financial information, is of such importance that it is fundamental to a
reader’s understanding of the financial and non-financial information; and/or
(b)
as appropriate, any other matter that is relevant to a reader’s understanding
of the annual audit, the Appointed Auditor’s responsibilities, or the audit
report.
Definitions
5.
For the purpose of this Auditor-General’s Auditing Statement the defined terms have
the meanings attributed:
1
The ISA (NZ) auditing standards are scoped so that they apply to audits of “historical financial information”.
However, for the purposes of the Auditor-General’s auditing standards and statements, all references to
“historical financial information” should be read as the audit of “historical financial and historical non-financial
information”.
Issued 03/14
Office of the Auditor-General
3 - 5001
AG ISA (NZ) 706 Emphasis of matter paragraphs and other matter paragraphs
(a)
in the Glossary of Terms issued by the New Zealand Auditing and Assurance
Standards Board (the NZAuASB glossary) of the External Reporting Board
(although where a term with a specific meaning in the New Zealand public
sector differs from the NZAuASB glossary, the New Zealand public sector
definition shall prevail); and
(b)
in the Auditor-General’s Glossary of Terms.
Requirements
Matters to consider when preparing an audit report containing an emphasis of matter
or other matter paragraph
6.
The Appointed Auditor shall personally sign the audit report at the completion of the
annual audit.
7.
The Appointed Auditor shall not issue an audit report containing an emphasis of
matter or other matter paragraph without prior reference to the OAG, unless a specific
direction to do so has been provided (refer to AG ISA (NZ) 700 on audit reports to be
referred to the Auditor-General’s Opinions Review Committee - ORC). The Appointed
Auditor shall, in keeping with AG ISA (NZ) 700, obtain the approval of the ORC before
issuing an audit report if there is a technical matter related to that audit report that
they are unsure about.
8.
When preparing an audit report containing an emphasis of matter or other matter
paragraph, the Appointed Auditor shall ensure that they apply any requirements:
(a)
issued by the OAG in respect of particular audits or sectors;
(b)
contained in AG ISA (NZ) 706 and ISA (NZ) 706; and
(c)
contained in AG ISA (NZ) 700 and ISA (NZ) 700.
Issued 03/14
Office of the Auditor-General
3 - 5002
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Appendix 1 - Examples of emphasis of matter and other matter
paragraphs
Considerations to take into account in choosing the correct audit report template
1.1
There are six examples of emphasis of matter and other matter paragraphs in audit
reports in this appendix. The examples refer to specific entities. The examples can be
used interchangeably for a public sector company or non-company such as a trust.
The highlighted words or sentences that are found in the examples can be replaced to
suit the audit report of the particular entity being audited. The examples can also be
combined when the examples apply to the entity subject to audit and are relevant to
the entity’s audit report. In the case of a reporting entity, the audit opinion must
include the following terms to comply with the Financial Reporting Act 1993. Such
terms include:
(a)
“Give a true and fair view of”; and
(b)
“Proper accounting records have been kept by the [entity] as far as appears
from an examination of those records”; and
(c)
1.2
“All information and explanations required have been obtained.”
Please note that the requirement to express an opinion on proper accounting records
is only to be included for reporting entities. Normally, in the case of a non-company
entity, (a) is replaced by “fairly reflect” and (b) is not used in the audit report.
1.3
Where a statement of service performance is audited, it should be referred to
correctly in the audit report. Positioning of the reference to the statement of service
performance depends on the legislation governing the reporting requirements of the
entity in question. In some instances, the statement of service performance is referred
to as performance information, because that is the term defined in the legislation that
sets the reporting requirements.
1.4
Where a “profit oriented” entity has adopted International Financial Reporting
Standards (IFRS) and management, and those changed with governance specifically
want the audit report to include a reference to IFRS, an additional opinion on whether
the financial statements comply with IFRS should be included in the audit report.
Issued 03/14
Office of the Auditor-General
3 - 5003
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-01 – Standard unmodified audit report for a company and
group with an emphasis of matter paragraph outlining uncertainties over the use of
the going concern assumption
1.5
Example Audit Report 706-01 is the audit report template for a company and group,
which is an issuer (in accordance with the requirements of the Financial Reporting Act
1993), where the Appointed Auditor is issuing an unmodified opinion with an
emphasis of matter paragraph outlining uncertainties about the company’s ability to
continue as a going concern. An emphasis of matter paragraph has been included in
the audit report because, in the auditor’s judgement, the matter disclosed is of such
importance that it is fundamental to a reader’s understanding of the financial
statements. In this example, the company and group are not required to report nonfinancial information through a statement of service performance.
Example Audit Report 706-02 – Standard unmodified audit report for a non-company
with an emphasis of matter paragraph outlining that the financial statements have
been appropriately prepared on an alternative basis
1.6
Example Audit Report 706-02 is the audit report template for a non-company, which is
not an issuer (in accordance with the requirements of the Financial Reporting Act
1993), where the Appointed Auditor is issuing an unmodified opinion which includes
an emphasis of matter paragraph. The emphasis of matter paragraph draws attention
to the financial statements of the entity having been prepared on a non-going concern
basis, and that the Appointed Auditor concurs with this alternative basis of
preparation. An emphasis of matter paragraph has been included in the audit report
because, in the auditor’s judgement, the matter disclosed is of such importance that it
is fundamental to a readers’ understanding of the financial statements. In this
example, the entity is not required to report non-financial information through a
statement of service performance.
Example Audit Report 706-03 – Standard unmodified audit report for a non-company
with an emphasis of matter paragraph outlining that the entity is experiencing
financial difficulties
1.7
Example Audit Report 706-03 is the audit report template for a non-company, which is
not an issuer (in accordance with the requirements of the Financial Reporting Act
1993), where the Appointed Auditor is issuing an unmodified opinion with an
emphasis of matter paragraph that outlines that the entity is experiencing financial
difficulties. An emphasis of matter paragraph has been included in the audit report
because, in the auditor’s judgement, the matter that has been disclosed is of such
Issued 03/14
Office of the Auditor-General
3 - 5004
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
importance that it is relevant to a reader’s understanding of the audit. In this example,
the entity is not required to report non-financial information through a statement of
service performance.
Example Audit Report 706-04 – Standard unmodified audit report for a company with
an emphasis of matter paragraph outlining that the financial statements, the
statement of service performance and the audit report were reissued
1.8
Example Audit Report 706-04 is the audit report template for a company, which is an
issuer (in accordance with the requirements of the Financial Reporting Act 1993),
where the Appointed Auditor is issuing an unmodified opinion with an emphasis of
matter paragraph outlining that the financial statements, the statement of service
performance, and the audit report were reissued. An emphasis of matter paragraph
has been included in the audit report because, in the auditor’s judgement, the matter
disclosed is of such importance that it is fundamental to a reader’s understanding of
the financial and non-financial information.
Example Audit Report 706-05 – Standard unmodified audit report for a non-company
with an other matter paragraph outlining a breach of law
1.9
Example Audit Report 706-05 is the audit report template for a non-company, which is
not an issuer (in accordance with the requirements of the Financial Reporting Act
1993), where the Appointed Auditor is issuing an unmodified opinion with an other
matter paragraph that outlines that the entity failed to comply with relevant legislation.
An other matter paragraph has been included in the audit report because, in the
auditor’s judgement, the matter is of such importance that it is relevant to a reader’s
understanding of the audit. In this example, the entity is required to report nonfinancial information through a statement of service performance.
Example Audit Report 706-06 – Standard unmodified audit report for a non-company
with an other matter paragraph outlining insufficient regard by the entity to waste,
probity, or financial prudence
1.10
Example Audit Report 706-06 is the audit report template for a non-company, which is
not an issuer (in accordance with the requirements of the Financial Reporting Act
1993), where the Appointed Auditor is issuing an unmodified opinion with an other
matter paragraph that outlines that the governing body incurred expenditure that is
considered to be wasteful and without enough regard to probity or financial prudence.
An other matter paragraph has been included in the audit report because, in the
auditor’s judgement, the matter that has not been disclosed is of such importance that
Issued 03/14
Office of the Auditor-General
3 - 5005
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
it is relevant to a reader’s understanding of the audit. In this example, the entity is not
required to report non-financial information through a statement of service
performance.
Issued 03/14
Office of the Auditor-General
3 - 5006
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-01
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF COMPANY] LIMITED AND GROUP’S
FINANCIAL STATEMENTS
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Company] Limited (the company) and group. The Auditor-General has
appointed me, [Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the
audit of the financial statements of the company and group on her behalf.
2
We have audited the financial statements of the company and group on pages […] to […], that comprise the
[statement of financial position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes
in equity and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that
include accounting policies and other explanatory information].
Opinion on the Financial Statements
3
In our opinion, the financial statements of the company and group on pages [...] to [...]:
-
comply with generally accepted accounting practice in New Zealand; and
-
give a true and fair view of the company and group’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date.
4
Validity of the going concern basis on which the financial statements have been prepared
5
Without modifying our opinion, we considered the adequacy of the disclosures made in note […] on page […] about
the Board of Directors’ negotiations for continued financial support from [Name of lender]. We consider the
disclosures to be adequate. The outcome of the negotiations is uncertain at this stage. The validity of the going
concern assumption on which the financial statements have been prepared depends on the successful conclusion of
the negotiations.
Opinion on other legal requirements
In accordance with the Financial Reporting Act 1993 we report that, in our opinion, proper accounting records have
been kept by the company and group as far as appears from an examination of those records.
2
3
4
5
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Appointed Auditors shall use the heading “Emphasis of Matter - …”, or another appropriate heading such as
“Our comments on - …” in accordance with the requirements in paragraph 7(b) of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5007
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and
our responsibilities, and we explain our independence.
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements. If we had found material misstatements that were
not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgement, including our assessment of risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the preparation of the company and group’s financial statements that give a true
and fair view of the matters to which they relate. We consider internal control 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
company and group’s internal control.
An audit also involves evaluating:
-
-
the appropriateness of accounting policies used and whether they have been consistently applied;
the reasonableness of the significant accounting estimates and judgements made by the Board of
Directors;
-
the adequacy of all disclosures in the financial statements; and
-
the overall presentation of the financial statements.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. [Also, we
6
did not evaluate the security and controls over the electronic publication of the financial statements .]
In accordance with the Financial Reporting Act 1993, we report that we have obtained all the information and
explanations we have required. We believe that we have obtained sufficient and appropriate audit evidence to provide a
basis for our audit opinion.
Responsibilities of the Board of Directors
The Board of Directors is responsible for preparing financial statements that:
6
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
Issued 03/14
Office of the Auditor-General
3 - 5008
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
-
comply with generally accepted accounting practice in New Zealand; and
-
give a true and fair view of the company and group’s financial position, financial performance, and cash
flows for the year ended on that date.
The Board of Directors is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board
of Directors is also responsible for the publication of the financial statements, whether in printed or electronic form.
The Board of Directors’ responsibilities arise from the Financial Reporting Act 1993 [and name of relevant Act(s)]
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to
you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and the [Name of
relevant Act(s)].
Independence
When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the company and or any of its subsidiaries.
7
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
[City], New Zealand
7
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the company or any of its subsidiaries.” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5009
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-02
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF ENTITY]’S
FINANCIAL STATEMENTS
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Entity] (the [entity type]). The Auditor-General has appointed me,
[Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the audit of the
financial statements of the [entity type] on her behalf.
8
We have audited the financial statements of the [entity type] on pages […] to […], that comprise the [statement of
financial position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes in equity,
and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that include
accounting policies and other explanatory information].
Opinion
9
In our opinion, the financial statements of the [entity type] on pages [...] to [...], that are prepared on a
disestablishment basis:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date.
10
The financial statements are appropriately prepared on a disestablishment basis
11
Without modifying our opinion, we considered the accounting policy on page […], about the financial statements
being prepared on a disestablishment basis. We consider the disestablishment basis to be appropriate as the [entity
type] closed on [Date].
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the [Governing body] and
our responsibilities, and we explain our independence.
8
9
10
11
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Appointed Auditors shall use the heading “Emphasis of Matter - …”, or another appropriate heading such as
“Our comments on - …” in accordance with the requirements in paragraph 7(b) of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5010
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements. If we had found material misstatements that were
not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgement, including our assessment of risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments we
consider internal control relevant to the preparation of the entity’s financial statements that fairly reflect the matters to
which they relate. We consider internal control 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.
An audit also involves evaluating:
-
the appropriateness of accounting policies used and whether they have been consistently applied;
-
the reasonableness of the significant accounting estimates and judgements made by the [Governing Body];
-
the adequacy of all disclosures in the financial statements; and
-
the overall presentation of the financial statements.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. [Also, we
12
did not evaluate the security and controls over the electronic publication of the financial statements .]
We have obtained all the information and explanations we have required, and we believe that we have obtained
sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of the [Governing body]
The [Governing body] is responsible for preparing financial statements that:
-
-
comply with generally accepted accounting practice in New Zealand; and
fairly reflect the [entity type]’s financial position, financial performance, and cash flows for the year ended
on that date.
The [Governing body] is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The
[Governing body] is also responsible for the publication of the financial statements, whether in printed or electronic
form.
12
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
Issued 03/14
Office of the Auditor-General
3 - 5011
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
The [Governing body]’s responsibilities arise from the [Name of relevant Act(s)].
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to
you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and the [Name of
relevant Act(s)].
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the [entity type].
13
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
[City], New Zealand
13
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the [entity type].” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5012
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-03
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF ENTITY]’S
FINANCIAL STATEMENTS
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Entity] (the [entity type]). The Auditor-General has appointed me,
[Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the audit of the
financial statements of the [entity type] on her behalf.
14
We have audited the financial statements of the [entity type] on pages […] to […], that comprise the [statement of
financial position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes in equity,
and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that include
accounting policies and other explanatory information].
Opinion
15
In our opinion, the financial statements of the [entity type] on pages [...] to [...]:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date.
Financial difficulties
16
17
Without modifying our opinion, we considered the adequacy of the disclosures made in note […] on page […] about
the financial difficulties being experienced by the [entity type]. The financial difficulties have arisen primarily because
[insert reason(s)]. The [entity type] is managing the situation by [explanation on what is being done to turnaround the
situation].
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the [Governing body] and
our responsibilities, and we explain our independence.
14
15
16
17
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Appointed Auditors shall use the heading “Emphasis of Matter - …”, or another appropriate heading such as
“Our comments on - …” in accordance with the requirements in paragraph 7(b) of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5013
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements. If we had found material misstatements that were
not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgement, including the assessment of risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments we
consider internal control relevant to the preparation of the entity’s financial statements that fairly reflect the matters to
which they relate. We consider internal control 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.
An audit also involves evaluating:
-
the appropriateness of accounting policies used and whether they have been consistently applied;
-
the reasonableness of the significant accounting estimates and judgements made by the [Governing body];
-
the adequacy of all disclosures in the financial statements; and
-
the overall presentation of the financial statements.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. [Also, we
18
did not evaluate the security and controls over the electronic publication of the financial statements .]
We have obtained all the information and explanations we have required and we believe that we have obtained sufficient
and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of the [Governing body]
The [Governing body] is responsible for preparing financial statements that:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s financial position, financial performance, and cash flows.
The [Governing body] is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The
[Governing body] is also responsible for the publication of the financial statements, whether in printed or electronic
form.
18
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
Issued 03/14
Office of the Auditor-General
3 - 5014
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
The [Governing body]’s responsibilities arise from the [Name of relevant Act(s)].
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to
you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and the [Name of
relevant Act(s)].
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the [entity type].
19
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
[City], New Zealand
19
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the [entity type].” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5015
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-04
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF COMPANY] LIMITED’S
FINANCIAL STATEMENTS AND STATEMENT OF SERVICE PERFORMANCE
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Company] Limited (the company). The Auditor-General has appointed
me, [Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the audit of
the financial statements and statement of service performance of the company on her behalf.
We have audited:
-
20
the financial statements of the company on pages […] to […], that comprise the [statement of financial
position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes in equity,
and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that
include accounting policies and other explanatory information]; and
-
the statement of service performance of the company on pages […] to […].
Opinion on the Financial Statements and Statement of Service Performance
In our opinion:
-
-
21
the financial statements of the company on pages [...] to [...]:
-
comply with generally accepted accounting practice in New Zealand; and
-
give a true and fair view of the company’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date;
21
the statement of service performance of the company on pages […] to […]:
-
complies with generally accepted accounting practice in New Zealand; and
-
gives a true and fair view of the company’s service performance for the year ended [DD MM
20XX], including:
20
21
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Issued 03/14
Office of the Auditor-General
3 - 5016
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
-
its service performance compared with the forecasts in the statement of forecast
service performance at the start of the year; and
-
its actual revenue and output expenses compared with the forecasts in the statement of
forecast service performance at the start of the financial year.
22
Replacement financial statements, statement of service performance, and audit report
23
Without modifying our opinion, we draw attention to the fact that the financial statements on pages […] to […] and
the statement of service performance on pages […] to […] replace the previously issued financial statements and
statement of service performance dated [Date]. The previous financial statements and statement of service
performance have been replaced because [explain reason]. Attention is drawn to note [...] on page […], which
outlines the circumstances in more detail. This audit report replaces the audit report issued on [Date].
Opinion on other legal requirements
In accordance with the Financial Reporting Act 1993 we report that, in our opinion, proper accounting records have
been kept by the company as far as appears from an examination of those records.
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and
our responsibilities, and we explain our independence.
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
and statement of service performance are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements and statement of service performance. If we had
found material misstatements that were not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements and statement of service performance. The procedures selected depend on our judgement, including our
assessment of risks of material misstatement of the financial statements and statement of service performance,
whether due to fraud or error. In making those risk assessments we consider internal control relevant to the
preparation of the company’s financial statements and statement of service performance that give a true and fair view
of the matters to which they relate. We consider internal control 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.
An audit also involves evaluating:
22
23
Appointed Auditors shall use the heading “Emphasis of Matter - …”, or another appropriate heading such as
“Our comments on - …” in accordance with the requirements in paragraph 7(b) of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5017
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
-
-
the appropriateness of accounting policies used and whether they have been consistently applied;
the reasonableness of the significant accounting estimates and judgements made by the Board of
Directors;
-
the appropriateness of the reported service performance information within the framework for reporting
performance;
-
the adequacy of all disclosures in the financial statements and statement of service performance; and
-
the overall presentation of the financial statements and statement of service performance.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and
statement of service performance. [Also, we did not evaluate the security and controls over the electronic publication
24
of the financial statements and statement of service performance .]
In accordance with the Financial Reporting Act 1993, we report that we have obtained all the information and
explanations we have required. We believe that we have obtained sufficient and appropriate audit evidence to provide a
basis for our audit opinion.
Responsibilities of the Board of Directors
The Board of Directors is responsible for preparing financial statements and a statement of service performance that:
-
comply with generally accepted accounting practice in New Zealand;
-
give a true and fair view of the company’s financial position, financial performance and cash flows; and
-
give a true and fair view of its service performance which includes the company’s achievements compared
to its forecasts.
The Board of Directors is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements and a statement of service performance that are free from material misstatement,
whether due to fraud or error. The Board of Directors is also responsible for the publication of the financial statements
and statement of service performance, whether in printed or electronic form.
The Board of Directors’ responsibilities arise from the Financial Reporting Act 1993 [and name of relevant Act(s)].
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and statement of service
performance and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the
Public Audit Act 2001 and the [Name of relevant Act(s)].
Independence
24
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
Issued 03/14
Office of the Auditor-General
3 - 5018
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the company.
25
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
[City], New Zealand
25
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the company.” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5019
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-05
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF ENTITY]’S
FINANCIAL STATEMENTS AND STATEMENT OF SERVICE PERFORMANCE
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Entity] (the [entity type]). The Auditor-General has appointed me,
[Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the audit of the
financial statements and statement of service performance of the [entity type] on her behalf.
We have audited:
26
-
the financial statements of the [entity type] on pages […] to […], that comprise the [statement of financial
position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes in equity,
and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that
include accounting policies and other explanatory information]; and
-
the statement of service performance of the [entity type] on pages […] to […].
Opinion
In our opinion:
-
-
27
the financial statements of the [entity type] on pages [...] to [...]:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date;
27
the statement of service performance of the [entity type] on pages […] to […]:
-
complies with generally accepted accounting practice in New Zealand; and
-
fairly reflects the [entity type]’s service performance for the year ended [DD MM 20XX], including:
-
its service performance compared with the forecasts in the statement of forecast
service performance at the start of the financial year; and
26
27
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Issued 03/14
Office of the Auditor-General
3 - 5020
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
-
its actual revenue and output expenses compared with the forecasts in the statement of
forecast service performance at the start of the financial year.
Breach of law – [description of breach]
28
29
Without modifying our opinion, we draw attention to the fact that the [Governing body] did not comply with [relevant
section(s) of relevant Act(s)] because the [Governing body] did not [outline the breach of law that occurred].
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the [Governing body] and
our responsibilities, and we explain our independence.
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
and statement of service performance are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements and statement of service performance. If we had
found material misstatements that were not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements and statement of service performance. The procedures selected depend on our judgement, including our
assessment of risks of material misstatement of the financial statements and statement of service performance,
whether due to fraud or error. In making those risk assessments we consider internal control relevant to the
preparation of the entity’s financial statements and statement of service performance that fairly reflect the matters to
which they relate. We consider internal control 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.
An audit also involves evaluating:
-
the appropriateness of accounting policies used and whether they have been consistently applied;
-
the reasonableness of the significant accounting estimates and judgements made by the [Governing body];
-
the appropriateness of the reported service performance information within the framework for reporting
performance;
-
the adequacy of all disclosures in the financial statements and statement of service performance; and
-
the overall presentation of the financial statements and statement of service performance.
28
29
Appointed Auditors shall use the heading “Other Matter - …”, or another appropriate heading such as “Our
comments on - …” in accordance with the requirements in paragraph 8 of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5021
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and
statement of service performance. [Also, we did not evaluate the security and controls over the electronic publication
30
of the financial statements and statement of service performance .]
We have obtained all the information and explanations we have required and we believe that we have obtained sufficient
and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of the [Governing body]
The [Governing body] is responsible for preparing financial statements and a statement of service performance that:
-
comply with generally accepted accounting practice in New Zealand;
-
fairly reflect the [entity type]’s financial position, financial performance, and cash flows; and
-
fairly reflect its service performance which includes the [entity type]’s achievements compared to its
forecasts.
The [Governing body] is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements and a statement of service performance that are free from material misstatement,
whether due to fraud or error. The [Governing body] is also responsible for the publication of the financial statements
and statement of service performance, whether in printed or electronic form.
The [Governing body]’s responsibilities arise from the [Name of relevant Act(s)].
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and statement of service
performance and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the
Public Audit Act 2001 and the [Name of relevant Act(s)].
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the [entity type].
31
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
30
31
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the [entity type].” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5022
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
[City], New Zealand
Issued 03/14
Office of the Auditor-General
3 - 5023
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Example Audit Report 706-06
[Firm’s letterhead]
INDEPENDENT AUDITOR’S REPORT
TO THE READERS OF
[NAME OF ENTITY]’S
FINANCIAL STATEMENTS
FOR THE YEAR ENDED [DD MM 20XX]
The Auditor-General is the auditor of [Name of Entity] (the [entity type]). The Auditor-General has appointed me,
[Name of Appointed Auditor], using the staff and resources of [Name of Auditing Firm], to carry out the audit of the
financial statements of the [entity type] on her behalf.
32
We have audited the financial statements of the [entity type] on pages […] to […], that comprise the [statement of
financial position] as at [DD MM 20XX], the [statement of comprehensive income, statement of changes in equity,
and statement of cash flows] for the year ended on that date, and [the notes to the financial statements that include
accounting policies and other explanatory information].
Opinion
33
In our opinion, the financial statements of the [entity type] on pages [...] to [...]:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s:
-
financial position as at [DD MM 20XX]; and
-
financial performance and cash flows for the year ended on that date.
34
Wasteful expenditure that is indicative of a lack of probity and financial prudence
35
Without modifying our opinion, we draw attention to the fact that the [Governing body] incurred expenditure during
the year on [description of expenditure] of $[amount]. In our view, expenditure of this nature is wasteful and illustrates
a lack of probity and financial prudence on the part of the [Governing body].
Our audit was completed on [Date]. This is the date at which our opinion is expressed.
The basis of our opinion is explained below. In addition, we outline the responsibilities of the [Governing body] and
our responsibilities, and we explain our independence.
32
33
34
35
Ensure that the names that are used in the financial statements are replicated in the audit report.
Ensure that the page number range corresponds to the page numbers outlined in the introduction section.
Appointed Auditors shall use the heading “Other Matter - …”, or another appropriate heading such as “Our
comments on - …” in accordance with the requirements in paragraph 8 of ISA (NZ) 706.
Appointed Auditors should update this opinion reference so that it is consistent with the type of opinion that is
issued.
Issued 03/14
Office of the Auditor-General
3 - 5024
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Basis of opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the
International Standards on Auditing (New Zealand). Those standards require that we comply with ethical
requirements and plan and carry out the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to
influence readers’ overall understanding of the financial statements. If we had found material misstatements that were
not corrected, we would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgement, including our assessment of risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments we
consider internal control relevant to the preparation of the entity’s financial statements that fairly reflect the matters to
which they relate. We consider internal control 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.
An audit also involves evaluating:
-
the appropriateness of accounting policies used and whether they have been consistently applied;
-
the reasonableness of the significant accounting estimates and judgements made by the [Governing body];
-
the adequacy of all disclosures in the financial statements; and
-
the overall presentation of the financial statements.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. [Also, we
36
did not evaluate the security and controls over the electronic publication of the financial statements .]
We have obtained all the information and explanations we have required and we believe that we have obtained sufficient
and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of the [Governing body]
The [Governing body] is responsible for preparing financial statements that:
-
comply with generally accepted accounting practice in New Zealand; and
-
fairly reflect the [entity type]’s financial position, financial performance, and cash flows.
The [Governing body] is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The
[Governing body] is also responsible for the publication of the financial statements, whether in printed or electronic
form.
The [Governing body]’s responsibilities arise from the [Name of relevant Act(s)].
36
This sentence should only be removed if there is no intention to publish the audit report on the public entity’s
web site.
Issued 03/14
Office of the Auditor-General
3 - 5025
AG ISA (NZ) 706 Emphasis of matter and other matter paragraphs
Responsibilities of the Auditor
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to
you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and the [Name of
relevant Act(s)].
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate
the independence requirements of the External Reporting Board.
Other than the audit, we have no relationship with, or interests in, the [entity type].
37
[Signature of Appointed Auditor]
[Name of Appointed Auditor]
[Name of Auditing Firm]
On behalf of the Auditor-General
[City], New Zealand
37
If other relationships exist, this paragraph should be replaced with the following paragraph: “In addition to the
audit we have carried out assignments in the areas of [insert description of assignments], which are
compatible with those independence requirements. Other than the audit and these assignments, we have no
relationship with or interests in the [entity type].” (Refer AG ISA (NZ) 700 for guidance).
Issued 03/14
Office of the Auditor-General
3 - 5026