Compliance Management, Audit and Due Diligence · Forming an Opinion and Reporting

Auditor's Report under SA 700 and the Companies Act

Updated 11 October 2026 · Fact-checked

The auditor's report is the written opinion of the auditor on whether financial statements give a true and fair view. SA 700 (Revised) fixes its structure: title, addressee, Opinion, Basis for Opinion, Key Audit Matters, responsibilities of management and auditor, and a Report on Other Legal and Regulatory Requirements under the Companies Act. In answers, follow this order.

Understand Auditor's Report under SA 700 and Companies Act

The auditor's report is the end product of an audit. Members of the company rely on it. SA 700 (Revised) says how the auditor forms an opinion and how the report must look, so that readers see the same structure in every report.

The report opens with the title "Independent Auditor's Report" and an addressee, for a company, "To the Members of ABC Company Limited". Then comes the heading "Report on the Audit of the Financial Statements". Under it, the Opinion section identifies the financial statements audited (balance sheet, statement of profit and loss, cash flow statement, notes and summary of significant accounting policies). It states that they give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

The Basis for Opinion section says the audit was conducted in accordance with the Standards on Auditing specified under section 143(10) of the Companies Act, 2013. It points to the auditor's responsibilities section, states independence under the ICAI's Code of Ethics and the Companies Act, and says the audit evidence is sufficient and appropriate to provide a basis for the opinion. In a modified report, this heading changes, for example to Basis for Qualified Opinion.

Key Audit Matters (KAMs) are matters that, in the auditor's professional judgment, were of most significance in the audit of the current period. They are described under SA 701. The report says the auditor does not give a separate opinion on them. Next come the sections on Other Information (SA 720), Responsibilities of Management and Those Charged with Governance, and the Auditor's Responsibilities.

The last part is the Report on Other Legal and Regulatory Requirements. Here the auditor reports under section 143(3) of the Companies Act, 2013, rewording the illustrative wording to suit the audit. The report ends with the firm's name and registration number, the signing member's name and membership number, place and date.

Key rules to remember

Order of sections in the report: Title → Addressee → Opinion → Basis for Opinion → Key Audit Matters → Other Information → Management's responsibilities → Auditor's responsibilities → Other Legal and Regulatory Requirements → Signature, place, date; Illustrative order from the SA 700 and SA 706 illustrations. Emphasis of Matter and Other Matter paragraphs sit as separate sections, as in the SA 706 illustration, where Other Matter follows Key Audit Matters.
Standards followed: Audit conducted in accordance with SAs specified under section 143(10) of the Companies Act, 2013; This is the wording in the Basis for Opinion section.
Opinion wording for an unmodified report: Gives the information required by the Companies Act, 2013 in the manner so required AND gives a true and fair view in conformity with accounting principles generally accepted in India; Both limbs are stated, along with the state of affairs, profit or loss and cash flows for the year.
Key audit matters: KAMs = matters of most significance in the audit of the current period; no separate opinion on them; Described as per SA 701. They are not a substitute for a modified opinion.
Section 143(3) reporting: Report on Other Legal and Regulatory Requirements: reword the illustration to suit the audit; SA 706 illustrations state that the auditor must suitably reword the wording to meet the circumstances of the audit.

How to solve Auditor's Report under SA 700 and Companies Act questions

Use this method for any question on the format or contents of the auditor's report.

1Read the facts and decide what is asked: structure, a particular section, or what to report in a given situation.
2Identify the type of report: standalone or consolidated, and whether the opinion is unmodified, qualified, adverse or a disclaimer.
3List the sections in SA 700 order and write only those the question needs.
4For each section, state what it must contain, such as the standards followed, independence, and sufficient and appropriate evidence.
5Apply the facts: decide if a KAM, Emphasis of Matter, Other Matter or a statutory reporting point arises.
6Name the standard for each point: SA 700, SA 701, SA 705, SA 706, SA 720 and section 143.
7Conclude with the exact opinion wording or the heading to be used, and the signing details.

Quickest way: Section-by-section skeleton

When to use it: When the question asks you to draft or outline the report in limited time.

Write the skeleton headings in order down the page.
Under Opinion, write the statements audited and the true and fair view wording.
Under Basis for Opinion, write the SAs under section 143(10), independence and sufficient appropriate evidence.
Add KAM, Other Information, and responsibilities lines in one sentence each.
Close with section 143(3) matters, signature, place and date.

Common mistakes in Auditor's Report under SA 700 and Companies Act

Placing Basis for Opinion before Opinion.
Students think the basis should come first logically.
Fix: Remember that Opinion comes first in SA 700 (Revised), then Basis for Opinion.
Treating key audit matters as a way to give a separate opinion.
The word "matter" suggests a qualification.
Fix: State that KAMs are matters of most significance in the current period and no separate opinion is given on them.
Using the same heading in a modified report.
Students memorise only the unmodified format.
Fix: In a qualified report, use Basis for Qualified Opinion and describe the matter and its effects.
Mixing up Emphasis of Matter and a qualification.
Both draw attention to a note.
Fix: An Emphasis of Matter ends with "Our opinion is not modified in respect of this matter." A qualification changes the opinion.
Omitting the Report on Other Legal and Regulatory Requirements.
Students focus only on SA 700 and forget the Companies Act.
Fix: Always add the section 143(3) part and say the wording is adapted to the audit.

Worked examples

Example 1

List, in order, the main sections of an unmodified auditor's report of a company under SA 700 (Revised) and the Companies Act, 2013.

Show the solution

Start with the title, Independent Auditor's Report, and the addressee, the members of the company.
Under the heading Report on the Audit of the Financial Statements, give the Opinion, identifying the statements audited and stating the true and fair view.
Give the Basis for Opinion: SAs under section 143(10), independence, and sufficient appropriate evidence.
Add Key Audit Matters under SA 701, and Other Information under SA 720 if applicable.
Add Responsibilities of Management and Those Charged with Governance, then Auditor's Responsibilities.
End with the Report on Other Legal and Regulatory Requirements under section 143(3), then signature, firm registration number, membership number, place and date.

Answer: Title and addressee, Opinion, Basis for Opinion, Key Audit Matters, Other Information, management's responsibilities, auditor's responsibilities, Report on Other Legal and Regulatory Requirements, and signature block.

Example 2

The statutory auditor of Sundaram Textiles Limited finds that inventory is carried at cost, not at the lower of cost and net realisable value, a departure from the accounting standards under section 133. The effect is material but not pervasive. Advise on the report.

Show the solution

The departure from standards is a material misstatement, and it is limited, not pervasive, so a qualified opinion is appropriate under SA 705 (Revised).
Change the heading Basis for Opinion to Basis for Qualified Opinion.
Describe the matter: inventory carried at cost, the departure from the standards under section 133, and the quantified effect on cost of sales, income tax, net income and shareholders' funds, where practicable.
In the Opinion, say that except for the effects of the matter described, the statements give a true and fair view.
Keep the other sections, and in the Other Information section describe the matter if it also affects the other information.
Sign with place and date.

Answer: Issue a qualified opinion with a Basis for Qualified Opinion section that describes the inventory departure and its quantified effects, and state that the opinion is qualified except for those effects.

Exam tips

Write section headings exactly as in SA 700 (Revised), so the examiner sees the structure quickly.
In case questions, state the provision, apply the facts, then conclude with the type of opinion.
Always mention section 143(10) for the standards and section 143(3) for statutory reporting.
Distinguish KAM, Emphasis of Matter and Other Matter clearly in one line each.
Quote the standard reference, such as SA 701 or SA 705, next to each point.

Practice questions from Forming an Opinion and Reporting

Auditor's Report under SA 700 and Companies Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Auditor's Report under SA 700 and Companies Act: frequently asked questions

What are the key sections of the auditor's report under SA 700?

They are the title, addressee, Opinion, Basis for Opinion, Key Audit Matters, Other Information, responsibilities of management and the auditor, and the Report on Other Legal and Regulatory Requirements. The report ends with the signature block, place and date.

What are key audit matters under SA 701?

Key audit matters are matters that, in the auditor's professional judgment, were of most significance in the audit of the current period. The auditor describes each one and gives no separate opinion on them.

Which section of the Companies Act deals with the audit standards in the report?

The Basis for Opinion says the audit was done in accordance with the Standards on Auditing specified under section 143(10) of the Companies Act, 2013. Section 143(3) governs the matters reported under Other Legal and Regulatory Requirements.

Does an Emphasis of Matter paragraph modify the opinion?

No. It draws attention to a note in the financial statements, and the paragraph states that the opinion is not modified in respect of the matter. A qualification changes the opinion itself.