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REPORTING ON COMPARATIVE INFORMATION

PSA 710 has identified two financial reporting frameworks for comparatives:

COMPARATIVE FINANCIAL STATEMENTS

Amounts and other disclosures for the preceding period are included for comparison with the Financial

Statements of the current period, but do not form part of the current period Financial Statements

-the auditor should issue a report in which the comparative Financial Statements are specifically identified

because the auditor’s opinion is expressed individually on the Financial Statements of each period presented.

Can be illustrated under the following scenarios:

Prior Period Financial Statements audited by a Continuing Auditor

-auditor’s report should cover the current year’s Financial Statements as well as those for the prior periods

that were audited by the firm

-auditor should update his report on the Financial Statements of the prior period to determine if the report is

still appropriate.

Updating the report involves either:

*re-expressing the opinion originally issued; or

*expressing an opinion different from the one originally issued

When a continuing auditor’s updated report on prior year’s Financial Statements is different from the report

previously issued, the auditor’s report should include an Other Matter Paragraph stating:

-the fact that the updated report is different from the previous opinion;

-the date of the prior year’s report; 

-the type of opinion previously issued; and-the reasons for changing the auditor’s opinion 

Prior Period Financial Statements audited by another Auditor

There are two reporting options:

1. The predecessor auditor reissues the audit report on the prior period Financial Statements (he must take

steps to determine whether his report is still appropriate) 

-comparing the current period Financial Statements with the Financial Statements audited 

-a discussion with the successor auditor about any circumstances or events that may affect the Financial

Statements of the prior period 

-obtaining a letter of representation from the successor auditor*the predecessor’s report will be reissued bearing the original date and original wording of such report 

2. The predecessor auditor does not want to reissue his report on the prior period Financial Statements (the

successor auditor’s report on the current year’s Financial Statements should include an Other Matter

Paragraph stating)

-the fact that the prior period Financial Statements were audited by another auditor

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-the date of the predecessor auditor’s report 

-the type of opinion issued by the predecessor auditor and if the opinion is modified, the reasons therefore

Prior Period Financial Statements not Audited

-auditor should state in the report on the current year’s Financial Statements that the comparative Financial

Statements are UNAUDITED

-should perform appropriate procedures to provide reasonable assurance that the prior period Financial

Statements do not contain material misstatements that could affect the Financial Statements of the current

period

CORRESPONDING FIGURES

Where amounts and other disclosures for the preceding period are included as part of the current period

Financial Statements, and are intended to be read in relation to the amounts and other disclosures relating to

the current period. These corresponding figures are not presented as complete Financial Statements capable

of standing alone, but are an integral part of the current period Financial Statements intended to be read

only in relationship to the current period figures.

-auditor should issue a report that refers only to the Financial Statements of the current figure

-the comparatives are not specifically identified because the auditor’s opinion is on the current period’s

Financial Statements as a whole (including the corresponding figures)

The Auditor’s Responsibility to Other Information in Documents Containing Audited Financial Statements

(PSA 720)

An entity may publish many documents like annual reports that contain Other Information in addition to

audited Financial Statements and auditor’s report. The following guidelines must be observed. 

Reading other Information

-to identify material inconsistencies with the audited Financial Statements

Material Inconsistencies

-exist when the other information contradicts the information contained in the audited Financial Statements

-auditor shall determine whether the audited Financial Statements or the other information needs to be

revised

When the auditor identifies a material inconsistency, he should determine whether the audited Financial

Statements or the other information needs to be AMENDED

-the auditor should express a qualified or an adverse opinion

Material Inconsistencies Identified in Other Information Obtained Prior to the Date of the Auditor’s Report  

(PSA 705)

When management refuses to make the revision, the auditor shall communicate this matter to those charged

with governance; and

-Include in the auditor’s report an Other Matter(s) paragraph describing the material inconsistency in

accordance with PSA 706; or

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-Withhold the auditor’s report; or 

-Where withdrawal is legally permitted, withdraw from the engagement

Material Inconsistencies Identified in Other Information Obtained Subsequent to the Date of the Auditor’s

Report (PSA 560)

- When management refuses to make the revision, the auditor shall communicate this matter to those

charged with governance and take any further action.

Material Misstatements of Fact

-exist when other information, not related to matters appearing in the Financial Statements, is incorrectly

stated or presented

-auditor shall discuss the matter with engagement

-shall request management to consult with a qualified third party (such as entity’s legal counsel) and consider

the advice received

If management refuses to correct

-auditor shall notify those charged with governance of the auditor’s concern regarding the other informationand take any further appropriate action like obtaining legal advice