# SA 700 — Forming an Opinion and Reporting on Financial Statements
SA 700 prescribes how the auditor forms an opinion on the FS and the content & structure of the auditor's report. It promotes consistency, comparability and user understanding across audit reports globally.
## 1. Objectives of the Auditor
- To form an opinion on the FS based on evaluation of audit conclusions.
- To express that opinion clearly through a written report.
## 2. Forming the Opinion — Reasonable Assurance
The auditor forms an opinion on whether the FS are prepared, in all material respects, in accordance with the Applicable Financial Reporting Framework (AFRF). The conclusion takes into account:
- Whether Sufficient Appropriate Audit Evidence (SAAE) has been obtained.
- Whether uncorrected misstatements are material, individually or in aggregate.
- Evaluation of qualitative aspects.
## 3. Qualitative Aspects of Accounting Practices
- Management makes many judgments about amounts/disclosures.
- SA 260 discusses these qualitative aspects.
- Watch for lack of neutrality / management bias, e.g.:
- Selective correction of misstatements (correcting only those that increase earnings, not those that decrease).
- Possible bias in making accounting estimates (SA 540).
## 4. Specific Evaluations Required
The auditor shall evaluate whether:
- FS provide adequate disclosures to enable users to understand the effect of material transactions and events (T&E).
- Terminology used (including titles) is appropriate.
- Information is relevant, reliable, comparable and understandable.
- Significant accounting policies are adequately disclosed.
- Accounting policies are consistent with AFRF.
- Accounting estimates by management are reasonable.
For fair presentation frameworks, also evaluate:
- Overall presentation, structure and content of FS.
- Whether FS represent underlying T&E in a manner that achieves fair presentation.
## 5. Basic Elements of the Auditor's Report
| Element | Key Content |
|---|---|
| Title | Indicates report of independent auditor |
| Addressee | As per engagement (Members for general purpose; BOD for special purpose) |
| Opinion | First section — identifies entity, states FS audited, lists each statement, specifies date/period, refers to notes |
| Basis for Opinion | Follows Opinion. States SAAE obtained, refers to auditor's responsibilities, audit per SAs, independence statement |
| Going Concern | As per SA 570 |
| KAM | As per SA 701 |
| Other Information | As per SA 720 |
| Management's Responsibilities | Preparing FS per AFRF; IC for preparation free from MM; GC assessment |
| Auditor's Responsibilities | Detailed section (see below) |
| Other Reporting Responsibilities | Separate section: Report on Other Legal & Regulatory Requirements |
| Sign | In auditor's personal name AND firm's name, with Membership No., Firm Reg. No., UDIN |
| Place | City where signed |
| Date | Not earlier than date SAAE obtained AND FS prepared AND those with authority have taken responsibility |
## 6. Unmodified Opinion — Phrasing
Use one of the following:
- “In our opinion, the accompanying FS present fairly, in all material respects, … in accordance with [AFRF]”; OR
- “In our opinion, the accompanying FS give a true and fair view of … in accordance with [AFRF].”
Not appropriate: phrases like “with foregoing explanation” or “subject to” — these suggest a modification.
## 7. Auditor's Responsibilities Section (Key Statements)
The section shall state:
- Objectives of the auditor.
- That reasonable assurance is a high level of assurance, but not a guarantee.
- That misstatements can arise from fraud or error.
- Auditor exercises professional judgment and maintains professional skepticism.
Describe responsibilities — identify/assess ROMM; understand IC; evaluate accounting policies; conclude on management's use of GC; evaluate overall presentation; group audit responsibility.
Also state:
- Communication with TCWG re: scope, timing, significant deficiencies in IC.
- Statement of compliance with independence and ethical requirements.
- Determination of matters of most significance → KAM.
Location — may be within the report, within an appendix, or on the website of an appropriate authority where L&R permit.
## 8. Frameworks
- General Purpose Framework — FRF designed for the wide range of users. May be a fair presentation framework or a compliance framework.
- Fair Presentation Framework — requires compliance with framework AND either (i) acknowledges additional disclosures may be needed, OR (ii) acknowledges rare departures from framework may be needed for fair presentation.
- Compliance Framework — requires compliance but lacks the (i) and (ii) acknowledgements.
## 9. UDIN (Unique Document Identification Number)
- 18-digit alphanumeric, system-generated.
- Introduced because third persons were misrepresenting as CAs.
- Mandatory for audit reports and certificates signed by CAs in full-time COP.
## 10. Report Prescribed by Law
If L&R prescribes a specific layout, the report shall refer to SAs only if it includes (at minimum) all elements above except: Other Information (SA 720), Location of Auditor's Responsibility, and Other Reporting Responsibility.