What is the auditor's report?
ISA 700.20–49 prescribe the structure of the auditor's report. The opinion section comes first, followed by the basis for opinion. For listed entities, a key audit matters section follows. Then come any responsibilities sections, including management's responsibility for the financial statements and the auditor's responsibilities for the audit. ISA 700.43–44 set the ordering, and that ordering is not optional.
The opinion paragraph itself is short. ISA 700.25–26 require the auditor to state whether the financial statements present fairly, in all material respects, or give a true and fair view (depending on the applicable framework). The phrase "in all material respects" connects the opinion directly to audit materiality: the auditor is not saying the financial statements are perfectly accurate. The auditor is saying that no misstatement, individually or in aggregate, exceeds the threshold that would influence the economic decisions of users.
For non-listed entities in the Netherlands, the report still follows ISA 700 but omits the KAM section unless the auditor voluntarily includes it. The going concern section under ISA 570.A29 applies regardless of listing status. Under Dutch law (Titel 9, Boek 2 BW), the auditor's report must also address certain statutory matters, which typically appear in a separate section after the ISA-prescribed content.
Key Points
- The report must follow a prescribed structure under ISA 700, including opinion, basis for opinion, going concern, and responsibility sections.
- An unmodified opinion means the financial statements are free of material misstatement in the auditor's judgment.
- Modified opinions (qualified, adverse, disclaimer) are governed by ISA 705, not ISA 700.
- Inspectors focus heavily on whether the report structure matches the circumstances of the engagement.
Why it matters in practice
The most common structural error is misordering the report sections. ISA 700.43–44 require the opinion section first. Reports that open with "Report on the Audit of the Financial Statements" as a heading and then place management's responsibilities before the opinion are non-compliant with the current ISA 700 structure, even if the content itself is correct.
For multi-framework reports (e.g., a Dutch entity reporting under both IFRS and RJ), some teams issue a single opinion paragraph that does not clearly distinguish which framework the opinion covers. ISA 700.26 requires the opinion to identify the applicable financial reporting framework. When two frameworks apply, the report must make it clear which set of financial statements the opinion relates to.
Worked example: Schneider Bau GmbH
Client: German construction subsidiary, FY2024, revenue €34M, HGB reporter (German GAAP). Non-listed. The audit is complete with no material misstatements remaining uncorrected. Going concern is not in doubt.
Confirm the opinion type: The engagement team reviewed the summary of audit differences. Total uncorrected misstatements amount to €48K, well below performance materiality of €170K. No qualitative misstatements require escalation. The opinion is unmodified.
Assemble the report sections in ISA 700 order: Opinion (ISA 700.25), Basis for Opinion (ISA 700.28), Going Concern (ISA 570), Responsibilities of Management (ISA 700.33–34), Auditor's Responsibilities (ISA 700.35–40). No KAM section (non-listed entity, not voluntarily included). The German statutory reporting requirements under HGB §322 are addressed in a supplementary section.
Review the report wording: The engagement partner reviewed the opinion wording against the applicable framework (HGB). The report uses "present a true and fair view" as required by HGB §264(2). ISA 700.25 permits this framework-specific wording. The report is defensible because each section follows ISA 700's prescribed order and the opinion wording matches the applicable reporting framework.
Unmodified report vs modified opinion
An unmodified report follows the standard ISA 700 structure and means the financial statements are free of material misstatement in the auditor's judgment. A modified opinion under ISA 705 means a material misstatement exists, or the auditor could not obtain sufficient appropriate audit evidence. Modified opinions come in three types: qualified, adverse, and disclaimer of opinion.
The structural difference is that a modified report replaces the "Basis for Opinion" section with a "Basis for Modification" section explaining the reason for the modification. The vast majority of audit reports are unmodified. Modified opinions are relatively rare in practice for listed entities, though they are more common in smaller entity audits where scope limitations or disagreements with management arise.
Key standard references
- ISA 700.20–49: Structure and content of the auditor's report on financial statements.
- ISA 700.25: Opinion wording for fair presentation frameworks ("true and fair view").
- ISA 700.27: Opinion wording for compliance frameworks.
- ISA 700.43–44: Prescribed ordering of report sections.
- ISA 705: Modifications to the opinion – qualified, adverse, and disclaimer.
Related terms
Related reading
Frequently asked questions
What is the required order of sections in the auditor's report?
ISA 700.43-44 prescribe the order: opinion first, then basis for opinion, going concern (ISA 570), key audit matters (listed entities), responsibilities of management, and auditor's responsibilities. Any emphasis of matter or other matter paragraphs sit between the basis for opinion and the responsibilities sections.
Does the opinion wording change depending on the financial reporting framework?
Yes. For fair presentation frameworks like IFRS, ISA 700.25 requires the opinion to state the financial statements 'give a true and fair view.' For compliance frameworks, ISA 700.27 requires 'prepared, in all material respects, in accordance with' the framework. Using the wrong wording renders the report non-compliant.