SA 705: Modification to Opinion#
Grounds for Modification#
1. Material Misstatement
- Financial statements are materially misstated
- Disagreement with management
2. Scope Limitation
- Unable to obtain sufficient appropriate evidence
- Limitations imposed by management
Types of Modified Opinions#
Qualified Opinion
- Material but not pervasive effect
- "Except for the effects of..."
Adverse Opinion
- Material and pervasive effect
- "do not give a true and fair view"
Disclaimer of Opinion
- Unable to obtain sufficient appropriate evidence
- Pervasive effect
- "we do not express an opinion"
Pervasive vs Material#
- Material: Affects user's economic decisions
- Pervasive: Affects many areas of financial statements
Basis for Modification#
- Description of matter giving rise to opinion
- Quantification of effect (if possible)
- How matter affects financial statements