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Think of SA 700 as the final delivery of an audit — after all the hard work of gathering evidence, the auditor must answer one question: Do these financial statements show a true and fair view? SA 700 governs exactly how that answer is formed and communicated through the Auditor's Report.

The standard requires the auditor to form an opinion based on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework (usually Ind AS or AS). If the auditor is satisfied — no material misstatements, sufficient appropriate evidence gathered — the opinion is Unmodified (Clean). This is the gold standard. The moment something is wrong or evidence is lacking, you move to SA 705 territory (modified opinions), but SA 700 lays the foundation for that too.

The Auditor's Report under SA 700 must contain these elements in a specific order — and this is heavily tested: Title (must say 'Independent Auditor's Report'), Addressee (shareholders/members, not management), Opinion paragraph (comes first now, post-2018 revision), Basis for Opinion, Going Concern section (if applicable), Key Audit Matters (only for listed entities), Management's Responsibilities, Auditor's Responsibilities, Other Reporting Responsibilities (like CARO 2020 for companies), Signature (name + membership number + firm details), Place, and Date (not before the date all evidence is obtained). A critical change in the revised SA 700: the Opinion paragraph leads — examiners love asking this. Also note that the Basis for Opinion paragraph must explicitly state that the audit was conducted per Standards on Auditing and that the auditor is independent per the ICAI Code of Ethics. This independence declaration is a new, mandatory element — don't miss it.

📊 Worked example

Example 1: Identifying elements in a given report extract

The ICAI exam gives you a draft auditor's report and asks: 'Which mandatory element is missing?'

Draft report includes: Title ✓, Addressee ✓, Opinion ✓, Basis for Opinion — but Basis paragraph does NOT mention auditor's independence.

Working:

SA 700 requires the Basis for Opinion paragraph to state:

1. Audit conducted per Standards on Auditing ✓ (present)

2. Auditor is independent per ICAI Code of Ethics ✗ (missing)

3. Auditor has fulfilled other ethical responsibilities ✗ (missing)

Answer: The report is deficient — the Basis for Opinion paragraph must explicitly declare independence and other ethical responsibilities. This makes the report non-compliant with SA 700.

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Example 2: Forming the opinion — unmodified or not?

Ms. Iyer, auditor of Rajesh & Co. Pvt. Ltd. (turnover ₹8,50,00,000), finds:

  • Financial statements prepared under Companies Act 2013 (AS framework) ✓
  • All evidence obtained; no material misstatements found ✓
  • One fixed asset of ₹12,000 not depreciated — error of ₹2,400
  • Materiality set at ₹4,25,000 (0.5% of turnover)

Working:

Error = ₹2,400. Materiality threshold = ₹4,25,000.

₹2,400 < ₹4,25,000 → error is immaterial.

Since no material misstatements exist and sufficient appropriate evidence has been obtained, Ms. Iyer issues an Unmodified Opinion under SA 700.

Answer: Unmodified (Clean) opinion. The ₹2,400 error, being far below materiality, does not affect the true and fair view.

⚠️ Common exam mistakes

  • Students write 'shareholders and Board of Directors' as addressee — Wrong. The report is addressed to the members (shareholders) of the company, not the Board. Directors appoint the auditor but are not the addressee.
  • Students place 'Management's Responsibility' paragraph first — This was the old format. Post-2018 revision of SA 700, the Opinion paragraph comes first, then Basis for Opinion. Examiners deduct marks for wrong sequence.
  • Students forget to mention independence in Basis for Opinion — SA 700 mandates that Basis for Opinion explicitly states the auditor is independent per ICAI Code of Ethics. Skipping this = incomplete answer.
  • Confusing SA 700 with SA 705 — SA 700 is ONLY about unmodified opinions and report structure. If the question involves qualification, adverse opinion, or disclaimer, that's SA 705. Don't mix them up in exam answers.
  • Students think Key Audit Matters (KAMs) apply to all companies — KAMs under SA 701 are mandatory only for listed entities. For a private limited company audit question, do not mention KAMs as a required element of the SA 700 report.
📖 Reference: SA 700 — Institute of Chartered Accountants of India
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