HKSA 705 - Modifications to the Opinion
1. Introduction and Scope
HKSA 705 (Revised) deals with the auditor's responsibility to issue an appropriate report when, in forming an opinion in accordance with HKSA 700 (Revised), the auditor concludes that a modification to the auditor's opinion on the financial statements is necessary.
Key Scope Elements:
- Addresses how the form and content of the auditor's report is affected when the auditor expresses a modified opinion
- All reporting requirements in HKSA 700 (Revised) continue to apply unless explicitly addressed or amended by HKSA 705
- Effective for audits of financial statements for periods ending on or after 15 December 2016
2. Types of Modified Opinions
HKSA 705 establishes three types of modified opinions:
| Type | Description |
|---|---|
| ------ | ------------- |
| Qualified Opinion | "Except for" the effects of the matter |
| Adverse Opinion | Financial statements do not present fairly |
| Disclaimer of Opinion | Auditor does not express an opinion |
Decision Factors:
- Nature of the matter: Whether financial statements are materially misstated OR inability to obtain sufficient appropriate audit evidence
- Pervasiveness: Auditor's judgment about the effects or possible effects on the financial statements
3. Definitions
Pervasive - Effects on the financial statements that, in the auditor's judgment:
- (i) Are not confined to specific elements, accounts or items of the financial statements
- (ii) If so confined, represent or could represent a substantial proportion of the financial statements
- (iii) In relation to disclosures, are fundamental to users' understanding of the financial statements
Modified opinion - A qualified opinion, an adverse opinion or a disclaimer of opinion on the financial statements
4. Objective
The objective of the auditor is to express clearly an appropriately modified opinion when:
- (a) The auditor concludes that the financial statements as a whole are not free from material misstatement
- (b) The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement
5. Circumstances Requiring Modification
The auditor shall modify the opinion when:
(a) Material Misstatement Exists (Ref: Para. A2-A7)
- Based on audit evidence obtained, financial statements as a whole are not free from material misstatement
(b) Inability to Obtain Sufficient Appropriate Audit Evidence (Ref: Para. A8-A12)
- Auditor is unable to obtain sufficient appropriate audit evidence to conclude that financial statements as a whole are free from material misstatement
6. Determining the Type of Modification
Decision Matrix (Para. A1)
| Nature of Matter | Material but Not Pervasive | Material and Pervasive |
|---|---|---|
| ----------------- | --------------------------- | ------------------------ |
| Financial statements are materially misstated | Qualified opinion | Adverse opinion |
| Inability to obtain sufficient appropriate audit evidence | Qualified opinion | Disclaimer of opinion |
Qualified Opinion (Para. 7)
Express a qualified opinion when:
- (a) Having obtained sufficient appropriate audit evidence, misstatements are material but not pervasive
- (b) Unable to obtain sufficient appropriate audit evidence, but possible effects could be material but not pervasive
Adverse Opinion (Para. 8)
Express an adverse opinion when:
- Having obtained sufficient appropriate audit evidence, misstatements are both material and pervasive
Disclaimer of Opinion (Para. 9-10)
Disclaim an opinion when:
- (Para. 9) Unable to obtain sufficient appropriate audit evidence, and possible effects could be both material and pervasive
- (Para. 10) In extremely rare circumstances involving multiple uncertainties, even though sufficient appropriate audit evidence obtained for each individual uncertainty, it is not possible to form an opinion due to potential interaction of uncertainties
7. Management-Imposed Limitations After Engagement Acceptance
Step 1 (Para. 11): Request management to remove the limitation
Step 2 (Para. 12): If management refuses:
- Communicate the matter to those charged with governance
- Determine whether alternative procedures can obtain sufficient appropriate audit evidence
Step 3 (Para. 13): If unable to obtain sufficient appropriate audit evidence:
| Scenario | Action Required |
|---|---|
| ---------- | ---------------- |
| Possible effects material but not pervasive | Qualify the opinion |
| Possible effects both material and pervasive | (i) Withdraw from audit (if practicable and possible under applicable law/regulation) OR (ii) If withdrawal not practicable/possible, disclaim an opinion |
Step 4 (Para. 14): If auditor withdraws, communicate to those charged with governance any matters regarding misstatements identified during the audit that would have given rise to a modification
8. Adverse Opinion or Disclaimer of Opinion - Additional Considerations
Para. 15: When expressing an adverse opinion or disclaiming an opinion on the financial statements as a whole, the auditor's report shall not also include an unmodified opinion with respect to the same financial reporting framework on a single financial statement or specific elements.
Exceptions that would NOT contradict (Para. A16):
- Unmodified opinion on financial statements under one framework AND adverse opinion on same financial statements under a different framework
- Disclaimer of opinion regarding results of operations and cash flows AND unmodified opinion regarding financial position
9. Form and Content of Modified Auditor's Report
Opinion Section Headings (Para. 16)
| Type of Modification | Heading Required |
|---|---|
| --------------------- | ------------------ |
| Qualified Opinion | "Qualified Opinion" |
| Adverse Opinion | "Adverse Opinion" |
| Disclaimer of Opinion | "Disclaimer of Opinion" |
Qualified Opinion Wording (Para. 17)
For material misstatement:
"except for the effects of the matter(s) described in the Basis for Qualified Opinion section"
For inability to obtain sufficient appropriate audit evidence:
"except for the possible effects of the matter(s)..."
Fair presentation framework:
"present fairly, in all material respects (or give a true and fair view of) [...] in accordance with [applicable financial reporting framework]"
Compliance framework:
"have been prepared, in all material respects, in accordance with [applicable financial reporting framework]"
Adverse Opinion Wording (Para. 18)
"because of the significance of the matter(s) described in the Basis for Adverse Opinion section"
Fair presentation framework:
"do not present fairly (or give a true and fair view of) [...] in accordance with [applicable financial reporting framework]"
Compliance framework:
"have not been prepared, in all material respects, in accordance with [applicable financial reporting framework]"
Disclaimer of Opinion Wording (Para. 19)
The auditor shall:
- (a) State that the auditor does not express an opinion on the accompanying financial statements
- (b) State that, because of the significance of the matter(s), the auditor has not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion
- (c) Amend the statement required by HKSA 700 (Revised) para. 24(b) to state that the auditor was engaged to audit the financial statements
Basis for Opinion Section (Para. 20-27)
Heading Amendments (Para. 20):
- "Basis for Qualified Opinion"
- "Basis for Adverse Opinion"
- "Basis for Disclaimer of Opinion"
Content Requirements:
For material misstatement of specific amounts (Para. 21):
- Include description and quantification of financial effects
- If not practicable to quantify, state that fact
For material misstatement of qualitative disclosures (Para. 22):
- Include explanation of how disclosures are misstated
For non-disclosure of required information (Para. 23):
- (a) Discuss non-disclosure with those charged with governance
- (b) Describe nature of omitted information in Basis for Opinion section
- (c) Unless prohibited by law/regulation, include omitted disclosures if practicable and sufficient appropriate audit evidence obtained
For inability to obtain sufficient appropriate audit evidence (Para. 24):
- Include reasons for the inability
For qualified or adverse opinion (Para. 25):
- Amend statement about audit evidence to include word "qualified" or "adverse"
For disclaimer of opinion (Para. 26):
- Shall NOT include:
- Reference to section where auditor's responsibilities are described
- Statement about whether audit evidence obtained is sufficient and appropriate
Even with adverse opinion or disclaimer (Para. 27):
- Describe reasons for any other matters that would have required modification
Auditor's Responsibilities Section for Disclaimer of Opinion (Para. 28)
Include only:
- (a) Statement that auditor's responsibility is to conduct an audit in accordance with HKSAs and to issue an auditor's report
- (b) Statement that, because of the matter(s), auditor was not able to obtain sufficient appropriate audit evidence
- (c) Statement about auditor independence and other ethical responsibilities
Key Audit Matters and Other Information (Para. 29)
When disclaiming an opinion:
- Shall NOT include a Key Audit Matters section (HKSA 701)
- Shall NOT include an Other Information section (HKSA 720 (Revised))
- Exception: Unless required by law or regulation
10. Communication with Those Charged with Governance (Para. 30)
When the auditor expects to modify the opinion, the auditor shall communicate with those charged with governance:
- The circumstances that led to the expected modification
- The wording of the modification
Purpose (Para. A27):
- (a) Give notice of intended modification(s) and reasons
- (b) Seek concurrence regarding facts or confirm matters of disagreement
- (c) Provide opportunity for those charged with governance to provide further information
11. Nature of Material Misstatements (Application Guidance)
Para. A3: Material misstatements may arise in relation to:
- (a) Appropriateness of selected accounting policies
- (b) Application of selected accounting policies
- (c) Appropriateness or adequacy of disclosures
Appropriateness of Accounting Policies (Para. A4-A5):
- Selected policies not consistent with applicable financial reporting framework
- Financial statements do not correctly describe accounting policy
- Financial statements do not represent underlying transactions to achieve fair presentation
- Non-compliance with requirements for changes in accounting policies
Application of Accounting Policies (Para. A6):
- Inconsistent application between periods or to similar transactions
- Unintentional error in application
Disclosures (Para. A7):
- Not including all required disclosures
- Disclosures not presented in accordance with framework
- Not providing additional disclosures necessary for fair presentation
12. Nature of Inability to Obtain Sufficient Appropriate Audit Evidence
Para. A8: May arise from:
- (a) Circumstances beyond the control of the entity
- (b) Circumstances relating to nature or timing of auditor's work
- (c) Limitations imposed by management
Para. A9: Inability to perform a specific procedure does NOT constitute a scope limitation if alternative procedures can obtain sufficient appropriate audit evidence.
Examples of circumstances beyond entity's control (Para. A10):
- Accounting records destroyed
- Accounting records of significant component seized indefinitely by governmental authorities
Examples relating to nature/timing of auditor's work (Para. A11):
- Unable to obtain audit evidence about associate's financial information for equity method
- Timing of appointment prevents observation of physical inventory counting
- Controls not effective and substantive procedures alone insufficient
Examples of management-imposed limitations (Para. A12):
- Management prevents observation of physical inventory counting
- Management prevents requesting external confirmations
13. Key Takeaways Summary Table
| Aspect | Qualified Opinion | Adverse Opinion | Disclaimer of Opinion |
|---|---|---|---|
| -------- | ------------------ | ----------------- | ---------------------- |
| Cause | Material but not pervasive misstatement OR inability with material but not pervasive possible effects | Material and pervasive misstatement | Inability with material and pervasive possible effects OR multiple uncertainties |
| Opinion Heading | "Qualified Opinion" | "Adverse Opinion" | "Disclaimer of Opinion" |
| Basis Heading | "Basis for Qualified Opinion" | "Basis for Adverse Opinion" | "Basis for Disclaimer of Opinion" |
| Key Phrase | "except for" / "except for the possible effects of" | "because of the significance of" | "do not express an opinion" |
| Auditor's Responsibilities Section | Full description required | Full description required | Limited description only |
| KAM Section | Include (if applicable) | Include (if applicable) | Not included (unless required by law/regulation) |
| Other Information Section | Include (if applicable) | Include (if applicable) | Not included (unless required by law/regulation) |
PART 2: TRADITIONAL CHINESE STUDY NOTES
香港審計準則第705號（修訂）— 對獨立審計報告中意見的修訂
1. 引言與範圍
HKSA 705（修訂） 處理核數師在根據HKSA 700（修訂）形成意見時，認為有必要對財務報表的審計意見進行修訂的情況下，發出適當報告的責任。
主要範圍要素：
- 說明當核數師發表修訂意見時，審計報告的形式和內容如何受到影響
- HKSA 700（修訂）中的所有報告要求繼續適用，除非HKSA 705明確處理或修訂
- 適用於2016年12月15日或之後結束期間的財務報表審計
2. 修訂意見的類型
HKSA 705確立三種類型的修訂意見：
| 類型 | 描述 |
|---|---|
| ------ | ------ |
| 保留意見 | 「除……的影響外」 |
| 否定意見 | 財務報表未公允列報 |
| 無法表示意見 | 核數師不發表意見 |
決定因素：
- 事項的性質：財務報表是否存在重大錯誤陳述，或無法獲取充分適當的審計證據
- 廣泛性：核數師對事項影響或可能影響的判斷
3. 定義
廣泛性 — 在錯誤陳述的背景下，用於描述錯誤陳述對財務報表的影響，或由於無法獲取充分適當的審計證據而未能發現的錯誤陳述（如有）對財務報表的可能影響。對財務報表具有廣泛影響的錯誤陳述是那些，根據核數師的判斷：
- (i) 不限於財務報表的特定要素、賬戶或項目
- (ii) 如果如此限制，則代表或可能代表財務報表的重大比例
- (iii) 就披露而言，對使用者理解財務報表至關重要
修訂意見 — 對財務報表的保留意見、否定意見或無法表示意見
4. 目標
核數師的目標是在必要時明確表達適當修訂的意見：
- (a) 核數師基於所獲取的審計證據，得出結論認為財務報表整體存在重大錯誤陳述
- (b) 核數師無法獲取充分適當的審計證據以得出財務報表整體不存在重大錯誤陳述的結論
5. 需要修訂意見的情況
核數師應當在以下情況修訂意見：
(a) 存在重大錯誤陳述
- 基於所獲取的審計證據，財務報表整體存在重大錯誤陳述
(b) 無法獲取充分適當的審計證據
- 核數師無法獲取充分適當的審計證據以得出財務報表整體不存在重大錯誤陳述的結論
6. 確定修訂意見的類型
決策矩陣
| 事項性質 | 重大但不具廣泛性 | 重大且具廣泛性 |
|---|---|---|
| --------- | ---------------- | ---------------- |
| 財務報表存在重大錯誤陳述 | 保留意見 | 否定意見 |
| 無法獲取充分適當的審計證據 | 保留意見 | 無法表示意見 |
保留意見
在以下情況發表保留意見：
- (a) 已獲取充分適當的審計證據，錯誤陳述重大但不具廣泛性
- (b) 無法獲取充分適當的審計證據，但可能影響可能重大但不具廣泛性
否定意見
在以下情況發表否定意見：
- 已獲取充分適當的審計證據，錯誤陳述既重大又具廣泛性
無法表示意見
在以下情況無法表示意見：
- 無法獲取充分適當的審計證據，且可能影響可能既重大又具廣泛性
- 在涉及多重不確定性的極罕見情況下，即使已就每個單獨不確定性獲取充分適當的審計證據，由於不確定性的潛在相互作用及其對財務報表的可能累積影響，無法形成意見
7. 接受委聘後管理層施加的限制
第一步： 要求管理層移除限制
第二步： 如果管理層拒絕：
- 與治理層溝通此事
- 確定是否可以執行替代程序以獲取充分適當的審計證據
第三步： 如果無法獲取充分適當的審計證據：
| 情況 | 所需行動 |
|---|---|
| ------ | --------- |
| 可能影響重大但不具廣泛性 | 發表保留意見 |
| 可能影響既重大又具廣泛性 | (i) 退出審計委聘（如可行且適用法律法規允許）或 (ii) 如退出不可行/不可能，發表無法表示意見 |
第四步： 如果核數師退出，應向治理層溝通審計過程中識別的、會導致意見修訂的任何錯誤陳述事項
8. 否定意見或無法表示意見的額外考慮
當對整個財務報表發表否定意見或無法表示意見時，審計報告不得同時包含對同一財務報告框架下單一財務報表或特定要素的無保留意見。
不構成矛盾的例外情況：
- 對一個框架下的財務報表發表無保留意見，同時對同一財務報表在不同框架下發表否定意見
- 對經營成果和現金流量（如相關）發表無法表示意見，同時對財務狀況發表無保留意見
9. 修訂意見的審計報告形式和內容
意見部分標題
| 修訂類型 | 所需標題 |
|---|---|
| --------- | --------- |
| 保留意見 | 「保留意見」 |
| 否定意見 | 「否定意見」 |
| 無法表示意見 | 「無法表示意見」 |
保留意見措辭
對於重大錯誤陳述：
「除……的影響外」
對於無法獲取充分適當的審計證據：
「除……的可能影響外」
否定意見措辭
「由於……的重要性」
無法表示意見措辭
核數師應當：
- (a) 說明核數師不發表意見
- (b) 說明由於事項的重要性，核數師無法獲取充分適當的審計證據以為審計意見提供基礎
- (c) 修改HKSA 700（修訂）第24(b)段要求的陳述，說明核數師獲委聘審計財務報表
意見基礎部分
標題修改：
- 「保留意見的基礎」
- 「否定意見的基礎」
- 「無法表示意見的基礎」
內容要求：
對於特定金額的重大錯誤陳述：
- 包括描述和量化財務影響
- 如不可行，說明該事實
對於定性披露的重大錯誤陳述：
- 包括解釋披露如何錯誤陳述
對於未披露所需信息：
- (a) 與治理層討論未披露事項
- (b) 在意見基礎部分描述遺漏信息的性質
- (c) 除非法律法規禁止，包括遺漏的披露（如可行且已獲取充分適當的審計證據）
對於無法獲取充分適當的審計證據：
- 包括無法獲取的原因
對於保留或否定意見：
- 修改關於審計證據的陳述，包括「保留」或「否定」字樣
對於無法表示意見：
- 不得包括：
- 提及核數師責任描述部分的參考
- 關於所獲取審計證據是否充分適當的陳述
即使發表否定意見或無法表示意見：
- 描述核數師知悉的其他需要修訂意見的事項及其影響
無法表示意見時的核數師責任部分
僅包括：
- (a) 說明核數師的責任是按照香港審計準則進行審計並發出審計報告
- (b) 說明由於所述事項，核數師無法獲取充分適當的審計證據
- (c) 關於獨立性和其他道德責任的陳述
關鍵審計事項和其他信息
發表無法表示意見時：
- 不得包括關鍵審計事項部分
- 不得包括其他信息部分
- 例外： 除非法律法規要求
10. 與治理層的溝通
當核數師預期修訂意見時，應當與治理層溝通：
- 導致預期修訂的情況
- 修訂的措辭
目的：
- (a) 通知治理層預期的修訂及其原因
- (b) 尋求治理層對事實的同意或確認分歧事項
- (c) 為治理層提供提供進一步信息的機會
11. 重大錯誤陳述的性質
重大錯誤陳述可能涉及：
- (a) 所選會計政策的適當性
- (b) 所選會計政策的應用
- (c) 披露的適當性或充分性
會計政策的適當性：
- 所選政策不符合適用的財務報告框架
- 財務報表未正確描述會計政策
- 財務報表未以實現公允列報的方式表述或披露基礎交易和事項
- 未遵守會計政策變更的要求
會計政策的應用：
- 不同期間或對類似交易和事項的應用不一致
- 應用方法中的無意錯誤
披露：
- 未包括所有要求的披露
- 披露未按照框架列報
- 未提供實現公允列報所需的額外披露
12. 無法獲取充分適當審計證據的性質
可能源於：
- (a) 實體無法控制的情況
- (b) 與核數師工作的性質或時間安排相關的情況
- (c) 管理層施加的限制
如果替代程序可以獲取充分適當的審計證據，無法執行特定程序不構成範圍限制。
實體無法控制的情況示例：
- 會計記錄被銷毀
- 重要組成部分的會計記錄被政府當局無限期扣押
與工作性質/時間安排相關的情況示例：
- 無法獲取聯營公司財務信息的審計證據
- 委聘時間安排阻止觀察實物存貨盤點
- 控制無效且僅靠實質性程序不足
管理層施加的限制示例：
- 管理層阻止觀察實物存貨盤點
- 管理層阻止要求外部確認
13. 關鍵要點總結表
| 方面 | 保留意見 | 否定意見 | 無法表示意見 |
|---|---|---|---|
| ------ | --------- | --------- | ------------ |
| 原因 | 重大但不具廣泛性的錯誤陳述，或無法獲取證據且可能影響重大但不具廣泛性 | 重大且具廣泛性的錯誤陳述 | 無法獲取證據且可能影響既重大又具廣泛性，或多重不確定性 |
| 意見標題 | 「保留意見」 | 「否定意見」 | 「無法表示意見」 |
| 基礎標題 | 「保留意見的基礎」 | 「否定意見的基礎」 | 「無法表示意見的基礎」 |
| 關鍵措辭 | 「除……的影響外」/「除……的可能影響外」 | 「由於……的重要性」 | 「不發表意見」 |
| 核數師責任部分 | 需要完整描述 | 需要完整描述 | 僅限有限描述 |
| 關鍵審計事項部分 | 包括（如適用） | 包括（如適用） | 不包括（除非法律法規要求） |
| 其他信息部分 | 包括（如適用） | 包括（如適用） | 不包括（除非法律法規要求） |
# 50 MULTIPLE CHOICE QUESTIONS
Q1. According to HKSA 705, which of the following is NOT a type of modified opinion?
A. Qualified opinion
B. Adverse opinion
C. Unmodified opinion
D. Disclaimer of opinion
Answer: C
Q2. When determining the type of modified opinion, the auditor considers:
A. Only the nature of the matter giving rise to the modification
B. Only the pervasiveness of the effects
C. Both the nature of the matter and the pervasiveness of the effects
D. The materiality threshold set by management
Answer: C
Q3. A qualified opinion is appropriate when:
A. Misstatements are material and pervasive
B. Misstatements are material but not pervasive
C. The auditor cannot obtain any audit evidence
D. The financial statements are fairly presented
Answer: B
Q4. An adverse opinion should be expressed when:
A. The auditor is unable to obtain sufficient appropriate audit evidence
B. Misstatements are material but not pervasive
C. Misstatements are both material and pervasive
D. There are multiple uncertainties
Answer: C
Q5. A disclaimer of opinion is appropriate when:
A. The auditor has obtained sufficient appropriate audit evidence and misstatements are material but not pervasive
B. The auditor is unable to obtain sufficient appropriate audit evidence and possible effects could be both material and pervasive
C. The financial statements are fairly presented in all material respects
D. There is a single uncertainty that is material
Answer: B
Q6. The term "pervasive" in the context of HKSA 705 means effects that:
A. Are confined to specific elements of the financial statements
B. Are not material to the financial statements
C. Are not confined to specific elements, represent a substantial proportion, or are fundamental to users' understanding
D. Only relate to disclosure matters
Answer: C
Q7. When the auditor expresses a qualified opinion due to a material misstatement, the opinion section should include the phrase:
A. "because of the significance of the matter(s)"
B. "except for the effects of the matter(s)"
C. "do not express an opinion"
D. "subject to the foregoing explanation"
Answer: B
Q8. When the auditor expresses a qualified opinion due to an inability to obtain sufficient appropriate audit evidence, the opinion section should include the phrase:
A. "except for the effects of the matter(s)"
B. "except for the possible effects of the matter(s)"
C. "because of the significance of the matter(s)"
D. "we do not express an opinion"
Answer: B
Q9. The heading for the opinion section when expressing an adverse opinion should be:
A. "Qualified Opinion"
B. "Adverse Opinion"
C. "Disclaimer of Opinion"
D. "Modified Opinion"
Answer: B
Q10. When the auditor disclaims an opinion, the opinion section should state that:
A. The financial statements present fairly in all material respects
B. The auditor does not express an opinion on the financial statements
C. Except for the effects of the matter, the financial statements are fairly presented
D. The financial statements do not present fairly due to the significance of the matter
Answer: B
Q11. According to HKSA 705, when the auditor disclaims an opinion, the Basis for Opinion heading should be amended to:
A. "Basis for Qualified Opinion"
B. "Basis for Adverse Opinion"
C. "Basis for Disclaimer of Opinion"
D. "Basis for Modified Opinion"
Answer: C
Q12. If management imposes a scope limitation after the auditor has accepted the engagement, the auditor should first:
A. Immediately withdraw from the engagement
B. Request that management remove the limitation
C. Issue a disclaimer of opinion
D. Communicate with those charged with governance only
Answer: B
Q13. If management refuses to remove a scope limitation and the possible effects could be both material and pervasive, the auditor should:
A. Only qualify the opinion
B. Withdraw from the audit if practicable, or disclaim an opinion
C. Issue an adverse opinion
D. Issue an unmodified opinion with an emphasis of matter paragraph
Answer: B
Q14. When the auditor withdraws from an audit due to a management-imposed scope limitation, before withdrawing the auditor shall communicate to those charged with governance:
A. Only the reasons for withdrawal
B. Any matters regarding misstatements identified during the audit that would have given rise to a modification
C. The proposed fee adjustment
D. Nothing, as withdrawal terminates all communication
Answer: B
Q15. When expressing an adverse opinion on the financial statements as a whole, the auditor's report:
A. May include an unmodified opinion on a single financial statement under the same framework
B. Shall not include an unmodified opinion on a single financial statement under the same framework
C. Must include an unmodified opinion on a single financial statement
D. May include an unmodified opinion on specific elements only
Answer: B
Q16. Which of the following would NOT contradict an adverse opinion or disclaimer of opinion?
A. An unmodified opinion on the same financial statements under a different financial reporting framework
B. An unmodified opinion on a single financial statement under the same framework
C. An unmodified opinion on specific elements under the same framework
D. Both B and C
Answer: A
Q17. When the auditor expresses a qualified opinion, the statement about whether the audit evidence obtained is sufficient and appropriate should:
A. Be omitted entirely
B. Include the word "qualified"
C. Include the word "adverse"
D. Remain unchanged from HKSA 700 (Revised)
Answer: B
Q18. When the auditor disclaims an opinion, the auditor's report shall NOT include:
A. The heading "Disclaimer of Opinion"
B. A description of the reasons for the inability to obtain audit evidence
C. A reference to the section where auditor's responsibilities are described
D. The auditor's signature and date
Answer: C
Q19. When the auditor disclaims an opinion, the auditor's responsibilities section should include:
A. A full description of all auditor responsibilities
B. Only a statement that the auditor's responsibility is to conduct an audit, that the auditor was not able to obtain sufficient appropriate audit evidence, and the independence statement
C. Only the independence statement
D. No description of auditor responsibilities
Answer: B
Q20. When the auditor disclaims an opinion on the financial statements, the auditor's report:
A. Shall include a Key Audit Matters section
B. Shall not include a Key Audit Matters section unless required by law or regulation
C. May include a Key Audit Matters section at the auditor's discretion
D. Must include an Other Information section
Answer: B
Q21. The effective date of HKSA 705 (Revised) is for audits of financial statements for periods ending on or after:
A. 15 December 2015
B. 15 December 2016
C. 15 December 2017
D. 15 December 2018
Answer: B
Q22. A material misstatement of the financial statements may arise in relation to:
A. Only the appropriateness of selected accounting policies
B. Only the application of selected accounting policies
C. Only the appropriateness or adequacy of disclosures
D. All of the above
Answer: D
Q23. An inability to obtain sufficient appropriate audit evidence may arise from:
A. Circumstances beyond the control of the entity
B. Circumstances relating to the nature or timing of the auditor's work
C. Limitations imposed by management
D. All of the above
Answer: D
Q24. Which of the following is an example of circumstances beyond the control of the entity?
A. Management prevents the auditor from observing physical inventory counting
B. The entity's accounting records have been destroyed
C. The auditor is appointed too late to observe inventory counting
D. Management prevents requesting external confirmations
Answer: B
Q25. Which of the following is an example of circumstances relating to the nature or timing of the auditor's work?
A. Accounting records seized by governmental authorities
B. Management prevents observation of inventory counting
C. The auditor is unable to observe physical inventory counting due to the timing of appointment
D. Accounting records destroyed
Answer: C
Q26. When there is a material misstatement related to specific amounts, the auditor shall include in the Basis for Opinion section:
A. Only a description of the misstatement
B. A description and quantification of the financial effects, unless impracticable
C. Only quantification of the financial effects
D. A reference to management's explanation
Answer: B
Q27. When there is a material misstatement related to non-disclosure of required information, the auditor shall:
A. Only describe the nature of omitted information
B. Discuss the non-disclosure with those charged with governance, describe the nature of omitted information, and include the omitted disclosures if practicable
C. Immediately issue an adverse opinion
D. Include the omitted disclosures regardless of practicability
Answer: B
Q28. Disclosing omitted information within the Basis for Opinion section would not be practicable if:
A. The disclosures have not been prepared by management
B. The disclosures are not readily available to the auditor
C. The disclosures would be unduly voluminous
D. All of the above
Answer: D
Q29. Even when the auditor has expressed an adverse opinion, the auditor shall describe in the Basis for Opinion section:
A. Only the matter giving rise to the adverse opinion
B. The reasons for any other matters that would have required modification
C. Nothing else beyond the adverse opinion matter
D. Only positive aspects of the financial statements
Answer: B
Q30. When the auditor expects to modify the opinion, communication with those charged with governance shall include:
A. Only the fact that the opinion will be modified
B. The circumstances leading to the expected modification and the wording of the modification
C. Only the wording of the modification
D. Only the reasons for the modification
Answer: B
Q31. In extremely rare circumstances involving multiple uncertainties, the auditor may disclaim an opinion even though:
A. The auditor has not performed any audit procedures
B. The auditor has obtained sufficient appropriate audit evidence regarding each individual uncertainty
C. The financial statements are materially misstated
D. Management has imposed a scope limitation
Answer: B
Q32. The phrase "except for the possible effects of the matter(s)" is used when:
A. The auditor has identified a material misstatement
B. The modification arises from an inability to obtain sufficient appropriate audit evidence
C. The auditor expresses an adverse opinion
D. The auditor disclaims an opinion
Answer: B
Q33. When the auditor expresses an adverse opinion under a fair presentation framework, the opinion should state that the financial statements:
A. Present fairly in all material respects
B. Do not present fairly (or give a true and fair view)
C. Have been prepared in accordance with the framework
D. Except for the effects, present fairly
Answer: B
Q34. When the auditor expresses a qualified opinion under a compliance framework, the opinion should state that the financial statements:
A. Have been prepared, in all material respects, in accordance with the framework
B. Have not been prepared in accordance with the framework
C. Except for the effects, have been prepared in accordance with the framework
D. Present fairly in accordance with the framework
Answer: C
Q35. The auditor's inability to perform a specific procedure does NOT constitute a scope limitation if:
A. The auditor chooses not to perform the procedure
B. The auditor is able to obtain sufficient appropriate audit evidence by performing alternative procedures
C. Management refuses to allow the procedure
D. The procedure is too expensive
Answer: B
Q36. Which of the following is an example of a management-imposed limitation?
A. The entity's accounting records are destroyed by fire
B. The auditor is appointed after year-end
C. Management prevents the auditor from requesting external confirmation of specific account balances
D. The entity's computer system is not functioning
Answer: C
Q37. When the auditor disclaims an opinion, the statement required by HKSA 700 (Revised) paragraph 24(b) should be amended to state that:
A. The financial statements have been audited
B. The auditor was engaged to audit the financial statements
C. The financial statements were reviewed
D. No audit was performed
Answer: B
Q38. Consistency in the auditor's report helps to:
A. Reduce the auditor's liability
B. Promote users' understanding and identify unusual circumstances
C. Satisfy regulatory requirements only
D. Reduce audit costs
Answer: B
Q39. When the auditor expresses a qualified opinion, it would NOT be appropriate to use phrases such as:
A. "except for"
B. "with the foregoing explanation"
C. "except for the possible effects of"
D. Both B and phrases like "subject to"
Answer: D
Q40. If the auditor concludes that withdrawal from the audit is necessary due to a scope limitation, there may be a requirement to communicate matters relating to withdrawal to:
A. Only those charged with governance
B. Regulators or the entity's owners
C. Only management
D. No one, as the engagement is terminated
Answer: B
Q41. A material misstatement in relation to the appropriateness of selected accounting policies may arise when:
A. The selected policies are not consistent with the applicable financial reporting framework
B. The financial statements do not correctly describe an accounting policy
C. The financial statements do not represent underlying transactions to achieve fair presentation
D. All of the above
Answer: D
Q42. A material misstatement in relation to the application of selected accounting policies may arise when:
A. Management has not applied policies consistently between periods
B. There is an unintentional error in application
C. Both A and B
D. The policies are not consistent with the framework
Answer: C
Q43. A material misstatement in relation to disclosures may arise when:
A. The financial statements do not include all required disclosures
B. Disclosures are not presented in accordance with the framework
C. Additional disclosures necessary for fair presentation are not provided
D. All of the above
Answer: D
Q44. When the auditor disclaims an opinion, the auditor's report shall not include an Other Information section in accordance with:
A. HKSA 700 (Revised)
B. HKSA 701
C. HKSA 720 (Revised)
D. HKSA 705
Answer: C
Q45. The purpose of communicating with those charged with governance about an expected modification includes:
A. Giving notice of the intended modification and reasons
B. Seeking concurrence regarding facts
C. Providing opportunity for further information
D. All of the above
Answer: D
Q46. When the auditor expresses an adverse opinion, the heading for the Basis section should be:
A. "Basis for Qualified Opinion"
B. "Basis for Adverse Opinion"
C. "Basis for Disclaimer of Opinion"
D. "Basis for Opinion"
Answer: B
Q47. If the auditor is unable to obtain sufficient appropriate audit evidence and concludes that possible effects could be material but not pervasive, the auditor shall:
A. Express an adverse opinion
B. Disclaim an opinion
C. Qualify the opinion
D. Issue an unmodified opinion
Answer: C
Q48. When the auditor has obtained sufficient appropriate audit evidence and concludes that misstatements are both material and pervasive, the auditor shall:
A. Express a qualified opinion
B. Express an adverse opinion
C. Disclaim an opinion
D. Issue an unmodified opinion with an emphasis of matter
Answer: B
Q49. An example of the financial effects of material misstatements that the auditor may describe in the Basis for Opinion section is:
A. The quantification of effects on income tax, income before taxes, net income and equity if inventory is overstated
B. A general statement that the financial statements are misstated
C. A reference to management's explanation
D. The auditor's opinion on the matter
Answer: A
Q50. When the auditor disclaims an opinion, the description of auditor's responsibilities shall include a statement about:
A. The auditor's responsibility to detect all misstatements
B. Auditor independence and other ethical responsibilities
C. The auditor's responsibility to prepare the financial statements
D. The auditor's responsibility to maintain accounting records
Answer: B
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50 MCQs covering all sections. Timed at 1.25 min each (62.5 min total).
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