An Auditor’s report is considered to be modified if either an emphasis of matter paragraph(s) added to the report or if the opinion is other than unqualified. It includes matters that do not affect the auditor’s opinion emphasis of matter or matters that do affect the auditor’s opinion issuing qualified opinion, disclaimer of opinion or adverse opinion.
Uniformity in the form and content of each type of modified report will enhance the user’s understanding of such reports.
In certain circumstance, an auditor’s report may be modified adding an emphasis of matter paragraph to highlight a matter affecting the financial statements which is included in a note to the financial statements that more extensively discusses the matter. The addition of such an emphasis of matter paragraph does not affect the auditor’s opinion. The paragraph would preferably be included preceding the opinion paragraph and would ordinarily refer to the fact that the auditor’s opinion is not qualified in this respect.
An auditor may not be able to express an unqualified opinion when either of the following circumstances exists and, in the auditor’s judgment, the effect of the matter is or may be material to the financial statements:
there is a limitation on the scope of the auditor’s work; or
there is a disagreement with management regarding the acceptability of the accounting policies selected, the method of their application or the adequacy of financial statement disclosures.
The circumstances described in (a) could lead to a qualified opinion or a disclaimer of opinion. The circumstances described in (b) could lead to a qualified opinion or an adverse opinion.