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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

The auditor of Orion Co issues a qualified opinion because of a material but not pervasive misstatement. Which statement correctly describes how the report must be structured under ISA 705?

The Opinion section must be headed 'Qualified Opinion', and a 'Basis for Qualified Opinion' section follows it, describing the matter giving rise to the modification and quantifying the effect where practicable. The Opinion section is not omitted, and a Key Audit Matters section cannot be used to describe it.

  1. AThe Basis for Qualified Opinion section must come before the Opinion section, and the Opinion section is headed simply 'Opinion'
  2. BThe Opinion section is headed 'Qualified Opinion', and a Basis for Qualified Opinion section follows it and describes the matterCorrect
  3. CThe Opinion section is omitted and replaced by the Basis for Opinion section
  4. DThe qualification is described in a Key Audit Matters section instead of a separate Basis section

Explanation

ISA 705 requires the heading 'Qualified Opinion' and a Basis for Qualified Opinion section placed after the Opinion section, describing the matter and, where practicable, quantifying its effects. The Opinion section is never omitted. Key Audit Matters cannot be used to describe a matter giving rise to a modification.

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