The author has read numerous auditor’s reports in recent years, issued by firms of all sizes, all of which were signed and dated, representing to have conducted audit(s) in accordance with GAAS. Those readings reveal numerous compliance issues with the language used in auditor reports. Furthermore, our continuing review of Peer Review Matters for Further Consideration (MFCs) indicates that AU-C 700 remains a top 10 AU-C section when it comes to peer review MFCs. Similarly, AU-C 705 is frequently cited in MFCs. Based on the experiences of the author and on our review of 2021 Peer Review MFCs, we address the following key causes of compliance issues with auditor reports (Note that SAS 134 was generally not effective for the periods covered by the 2021 Peer Review MFCs.):
Failure to include required content in the auditor’s report as specified in AU-C 700, and other relevant AU-C sections, including report content sequencing.
Failure to express an appropriate opinion - Per AU-C 700.04, opinions are either unmodified, or modified (qualified, adverse, or disclaimer). AU-C 705 provides the standards applicable to modified opinions.
Errors and false statements regarding the audit scope, accounting principles, audit findings, or any other statement of substance