HKSA 700 - Forming an Opinion on Financial Statements (Condensed)

Introduction & Scope

Scope of HKSA 700 (Revised)

Deals with the auditor's responsibility to form an opinion on the financial statements and the form and content of the auditor's report.

Key Related Standards

• HKSA 701 - Key Audit Matters
• HKSA 705 (Revised) - Modifications to Opinion
• HKSA 706 (Revised) - Emphasis of Matter & Other Matter Paragraphs
• HKSA 800 (Revised) - Special Purpose Frameworks
• HKSA 805 (Revised) - Single Financial Statements

Effective Date

Effective for audits of financial statements for periods ending on or after 15 December 2016.

Objectives & Definitions

Auditor's Objectives (Para. 6)

1. To form an opinion on the financial statements based on evaluation of conclusions drawn from audit evidence.
2. To express clearly that opinion through a written report.

Key Definitions (Para. 7)

Forming an Opinion on the Financial Statements

Core Requirement (Para. 10-11)

The auditor shall form an opinion on whether the FS are prepared, in all material respects, in accordance with the applicable financial reporting framework.

Conclusion shall take into account:

1. Conclusion under HKSA 330 (sufficient appropriate audit evidence)
2. Conclusion under HKSA 450 (uncorrected misstatements)
3. Evaluations required by paragraphs 12-15

Evaluation of Financial Statements (Para. 12-13)

Fair Presentation Evaluation (Para. 14)

For fair presentation frameworks, evaluate:

1. Overall presentation, structure and content
2. Whether FS represent underlying transactions and events in a manner that achieves fair presentation

Form of Opinion

Unmodified Opinion (Para. 16)

Express an unmodified opinion when the auditor concludes that the FS are prepared, in all material respects, in accordance with the applicable financial reporting framework.

Modified Opinion Triggers (Para. 17)

Modify the opinion in accordance with HKSA 705 (Revised) if:

1. FS as a whole are not free from material misstatement
2. Auditor is unable to obtain sufficient appropriate audit evidence to conclude FS are free from material misstatement

Fair Presentation Framework - Special Considerations (Para. 18)

If FS do not achieve fair presentation, discuss with management and determine whether to modify the opinion.

Compliance Framework - Special Considerations (Para. 19)

Auditor is not required to evaluate fair presentation. In extremely rare circumstances where FS are misleading, discuss with management and determine how to communicate.

Auditor's Report - Structure and Content

General Requirements

• Title: 'Independent Auditor's Report' (Para. 21)
• Addressee: Normally shareholders or those charged with governance (Para. 22)
• In writing: Includes hard copy and electronic medium (Para. 20)

Opinion Section (Para. 23-27)

Heading: 'Opinion'

Content: Identify entity, state FS have been audited, identify each statement, refer to notes, specify date/period.

Wording for Fair Presentation: 'present fairly, in all material respects' OR 'give a true and fair view' (Hong Kong uses 'true and fair view').

Wording for Compliance: 'prepared, in all material respects, in accordance with [framework]'

Basis for Opinion Section (Para. 28)

Heading: 'Basis for Opinion'

Content: State audit conducted in accordance with HKSAs; refer to auditor's responsibilities; statement of independence; statement on sufficiency of audit evidence.

Key Audit Matters (Para. 30-31)

For listed entities: Shall communicate KAM in accordance with HKSA 701.

For other entities: When required by law/regulation or auditor decides.

Responsibilities Sections

Management's Responsibilities: Heading 'Responsibilities of Management for the Financial Statements' - describe preparation, internal control, going concern assessment.

Auditor's Responsibilities: Heading 'Auditor's Responsibilities for the Audit of the Financial Statements' - objectives, reasonable assurance, materiality, professional judgment/skepticism, risk assessment, internal control, accounting policies/estimates, going concern, fair presentation evaluation, group audit, communication with governance, independence, KAM determination.

Other Reporting Responsibilities (Para. 43-45)

Separate section with heading 'Report on Other Legal and Regulatory Requirements' following the 'Report on the Audit of the Financial Statements'.

Name of Engagement Partner (Para. 46)

For listed entities: Include name unless rare circumstance of significant personal security threat.

Date of Auditor's Report (Para. 49)

No earlier than date auditor has obtained sufficient appropriate audit evidence, including evidence that all statements and disclosures have been prepared and those with authority have taken responsibility.

Auditor's Report Prescribed by Law or Regulation

Minimum Elements to Refer to HKSAs (Para. 50)

If law or regulation requires a specific layout or wording, the auditor's report shall refer to HKSAs only if it includes, at a minimum, each of the following elements:

Dual Standards Reference & Supplementary Information

Audits Conducted in Accordance with Both Other Standards and HKSAs (Para. 51-52)

An auditor may refer to HKSAs in addition to other auditing standards only if:

1. No conflict exists between the requirements in the other auditing standards and HKSAs that would lead the auditor to form a different opinion OR not include an Emphasis of Matter paragraph or Other Matter paragraph required by HKSAs.
2. The auditor's report includes, at a minimum, each of the elements set out in paragraphs 50(a)-(o).

When referring to both standards, the auditor's report shall identify the jurisdiction of origin of the other auditing standards.

Evaluation of Supplementary Information (Para. 53-54)