ISA (NZ) 700 (Revised)

1. This International Standard on Auditing (New Zealand) (ISA (NZ)) deals with the auditor’s responsibility to form an opinion on the financial statements. It also deals with the form and content of the auditor’s report issued as a result of an audit of financial statements.

2. ISA (NZ) 701¹ deals with the auditor’s responsibility to communicate key audit matters in the auditor’s report. ISA (NZ) 705² (Revised) and ISA (NZ) 706³ (Revised) deal with how the form and content of the auditor’s report are affected when the auditor expresses a modified opinion or includes an Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. Other ISAs (NZ) also contain reporting requirements that are applicable when issuing an auditor’s report.

3. This ISA (NZ) applies to an audit of a complete set of general purpose financial statements and is written in that context. ISA (NZ) 800 (Revised)⁴ deals with special considerations when financial statements are prepared in accordance with a special purpose framework. ISA (NZ) 805 (Revised)⁵ deals with special considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement. This ISA (NZ) also applies to audits for which ISA (NZ) 800 (Revised) or ISA (NZ) 805 (Revised) apply.

4. The requirements of this ISA (NZ) are aimed at addressing an appropriate balance between the need for consistency and comparability in auditor reporting globally and the need to increase the value of auditor reporting by making the information provided in the auditor’s report more relevant to users. This ISA (NZ) promotes consistency in the auditor’s report, but recognises the need for flexibility to accommodate particular circumstances applicable in New Zealand. Consistency in the auditor’s report, when the audit has been conducted in accordance with ISAs (NZ), promotes credibility in the global marketplace by making more readily identifiable those audits that have been conducted in accordance with globally recognised standards. It also helps to promote the user’s understanding and to identify unusual circumstances when they occur.

NZ4.1 In New Zealand, those charged with governance generally have responsibility for ensuring an entity meets its legal obligations in relation to the preparation of the financial statements. In these cases the process of financial reporting is usually delegated to management, but the responsibility for such matters remains with those charged with governance. In applying this standard the auditor shall apply professional judgement, using knowledge of the legal requirements and corporate governance practices of New Zealand as well as the

5. This ISA (NZ) is effective for audits of financial statements for periods ending on or after 15 December 2016. [Note: For the effective dates of paragraphs changed or added by an Amending Standard see the History of Amendments].

NZ5.1 This ISA (NZ) supersedes ISA (NZ) 700, Forming an Opinion and Reporting on Financial Statements.

Transitional provisions

NZ5.2 Paragraph 30 of this ISA (NZ) requires that for audits of complete sets of general purpose financial statements of a FMC reporting entity considered to have a higher level of public accountability, the auditor shall communicate key audit matters in the auditor’s report in accordance with ISA (NZ) 701. The requirement to report key audit matters is subject to the following transitional provisions:

• For the audits of complete sets of general purpose financial statements of listed issuers, the auditor shall communicate key audit matters in the auditor’s report for periods ending on or after 15 December 2016. For the purposes of this transitional provision, a listed issuer is defined as a person that is party to a listing agreement with a licensed market operator in relation to a licensed market (and includes a licensed market operator that has financial products quoted on its own licensed market) (as defined in the Financial Markets Conduct Act 2013 section 6(1)).

• For the audits of complete sets of general purpose financial statements of a FMC reporting entity considered to have a higher level of public accountability other than listed issuers, the auditor shall communicate key audit matters in the auditor’s report for periods ending on or after 31 December 2018.

6. The objectives of the auditor are:

1. To form an opinion on the financial statements based on an evaluation of the conclusions drawn from the audit evidence obtained; and

2. To express clearly that opinion through a written report.

7. For purposes of the ISAs (NZ), the following terms have the meanings attributed below:

1. General purpose financial statements – Financial statements prepared in accordance with a general purpose framework.

   1. Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial statements, it may be necessary for management to provide disclosures beyond those specifically required by the framework; or

   2. Acknowledges explicitly that it may be necessary for management to depart from a requirement of the framework to achieve fair presentation of the financial statements. Such departures are expected to be necessary only in extremely rare circumstances.

   3. The term “compliance framework” is used to refer to a financial reporting framework that requires compliance with the requirements of the framework, but does not contain the acknowledgements in (i) or (ii) above.⁶

      General purpose framework – A financial reporting framework designed to meet the common financial information needs of a wide range of users. The financial reporting framework may be a fair presentation framework or a compliance framework.

      The term “fair presentation framework” is used to refer to a financial reporting framework that requires compliance with the requirements of the framework and:

2. Unmodified opinion – The opinion expressed by the auditor when the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.⁷

8. Reference to “financial statements” in this ISA (NZ) means “a complete set of general purpose financial statements.⁸ The requirements of the applicable financial reporting framework determine the presentation, structure and content of the financial statements, and what constitutes a complete set of financial statements.

9. Reference to “International Financial Reporting Standards” in this ISA (NZ) means the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board, and reference to “International Public Sector Accounting Standards” means the International Public Sector Accounting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board.

NZ9.1 Reference to “New Zealand equivalents to International Financial Reporting Standards (NZ IFRS)” or other applicable financial reporting requirements in this ISA (NZ) means the New Zealand equivalents to International Financial Reporting Standards or other financial reporting requirements issued by the New Zealand Accounting Standards Board.

10. The auditor shall form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.^9 10

11. In order to form that opinion, the auditor shall conclude as to whether the auditor has obtained reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. That conclusion shall take into account:

1. The auditor’s conclusion, in accordance with ISA (NZ) 330, whether sufficient appropriate audit evidence has been obtained;¹¹

2. The auditor’s conclusion, in accordance with ISA (NZ) 450, whether uncorrected misstatements are material, individually or in aggregate;¹² and

3. The evaluations required by paragraphs 12–15.

12. The auditor shall evaluate whether the financial statements are prepared, in all material respects, in accordance with the requirements of the applicable financial reporting framework. This evaluation shall include consideration of the qualitative aspects of the entity’s accounting practices, including indicators of possible bias in management’s judgements. (Ref: Para. A1–A3)

13. In particular, the auditor shall evaluate whether, in view of the requirements of the applicable financial reporting framework:

1. The financial statements appropriately disclose the significant accounting policies selected and applied. In making this evaluation, the auditor shall consider the relevance of the accounting policies to the entity, and whether they have been presented in an understandable manner; (Ref: Para. A4);

2. The accounting policies selected and applied are consistent with the applicable financial reporting framework and are appropriate;

3. The accounting estimates and related disclosures made by management are reasonable;

4. The information presented in the financial statements is relevant, reliable, comparable, and understandable. In making this evaluation, the auditor shall consider whether:

   • The information that should have been included has been included, and whether such information is appropriately classified, aggregated or disaggregated, and characterised.

   • The overall presentation of the financial statements has been undermined by including information that is not relevant or that obscures a proper understanding of the matters disclosed. (Ref: Para. A5)

5. The financial statements provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial statements; and (Ref: Para. A6)

6. The terminology used in the financial statements, including the title of each financial statement, is appropriate.

14. When the financial statements are prepared in accordance with a fair presentation framework, the evaluation required by paragraphs 12–13 shall also include whether the financial statements achieve fair presentation. The auditor’s evaluation as to whether the financial statements achieve fair presentation shall include consideration of: (Ref: Para A7– A9)

1. The overall presentation, structure and content of the financial statements; and

2. Whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

15. The auditor shall evaluate whether the financial statements adequately refer to or describe the applicable financial reporting framework. (Ref: Para. A10-A15)

16. The auditor shall express an unmodified opinion when the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.

17. If the auditor:

1. concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or

2. is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement,

the auditor shall modify the opinion in the auditor’s report in accordance with ISA (NZ) 705 (Revised).

18. If financial statements prepared in accordance with the requirements of a fair presentation framework do not achieve fair presentation, the auditor shall discuss the matter with management and, depending on the requirements of the applicable financial reporting framework and how the matter is resolved, shall determine whether it is necessary to modify the opinion in the auditor’s report in accordance with ISA (NZ) 705 (Revised). (Ref: Para. A16)

19. When the financial statements are prepared in accordance with a compliance framework, the auditor is not required to evaluate whether the financial statements achieve fair presentation. However, if in extremely rare circumstances the auditor concludes that such financial statements are misleading, the auditor shall discuss the matter with management and, depending on how it is resolved, shall determine whether, and how, to communicate it in the auditor’s report. (Ref: Para. A17)

20. The auditor’s report shall be in writing. (Ref: Para. A18–A19)

21. The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor. (Ref: Para. A20)

22. The auditor’s report shall be addressed, as appropriate, based on the circumstances of the engagement. (Ref: Para. A21)

23. The first section of the auditor’s report shall include the auditor’s opinion, and shall have the heading “Opinion.”

24. The Opinion section of the auditor’s report shall also:

1. Identify the entity whose financial statements have been audited;

2. State that the financial statements have been audited;

3. Identify the title of each statement comprising the financial statements;

4. Refer to the notes, including the summary of significant accounting policies; and

5. Specify the date of, or period covered by, each financial statement comprising the financial statements. (Ref: Para. A22–A23)

25. When expressing an unmodified opinion on financial statements prepared in accordance with a fair presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use one of the following phrases, which are regarded as being equivalent:

1. In our opinion, the accompanying financial statements present fairly, in all material respects, […] in accordance with [the applicable financial reporting framework]; or

2. In our opinion, the accompanying financial statements give a true and fair view of […] in accordance with [the applicable financial reporting framework]. (Ref: Para. A24–A31)

26. When expressing an unmodified opinion on financial statements prepared in accordance with a compliance framework, the auditor’s opinion shall be that the accompanying financial statements are prepared, in all material respects, in accordance with [the applicable financial reporting framework]. (Ref: Para. A26-A31)

27. If the reference to the applicable financial reporting framework in the auditor’s opinion is not to IFRSs issued by the International Accounting Standards Board or IPSASs issued by the International Public Sector Accounting Standards Board, the auditor’s opinion shall identify the jurisdiction of origin of the framework.

NZ27.1 For an entity in New Zealand, that is required to apply the New Zealand Accounting Standards Framework, the reference to the applicable financial reporting framework in the auditor’s opinion should be to the applicable financial reporting requirements issued by the New Zealand Accounting Standards Board that apply to the tier under which the entity is reporting. (Ref: Para. NZA28.1)

28. The auditor’s report shall include a section, directly following the Opinion section, with the heading “Basis for Opinion”, that: (Ref: Para. A32)

1. States that the audit was conducted in accordance with International Standards on Auditing (New Zealand); (Ref: Para. A33)

2. Refers to the section of the auditor’s report that describes the auditor’s responsibilities under the ISAs (NZ);

3. Includes a statement that the auditor is independent of the entity in accordance with the relevant ethical requirements relating to the audit and has fulfilled the auditor’s other ethical responsibilities in accordance with these requirements. The statement shall identify the jurisdiction of origin of the relevant ethical requirements or refer to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code); and (Ref: Para. A34-A39)

4. States whether the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.

NZ28(c) In New Zealand, the statement required by paragraph 28(c) shall refer to Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board.

NZ28.1 The auditor’s report shall include a statement as to the existence of any relationship (other than that of auditor) which the auditor has with, or any interests which the auditor has in the entity. [NZ] Appendix 2 provides an example of the wording that may be used in the audit of financial statements to identify relationships with, or interest in, the entity.

29. Where applicable, the auditor shall report in accordance with ISA (NZ) 570 (Revised).¹³

30. [Amended by the NZAuASB].

NZ30.1 For audits of complete sets of general purpose financial statements of FMC reporting entities considered to have a higher level of public accountability, the auditor shall communicate key audit matters in the auditor’s report in accordance with ISA (NZ) 701.

31. When the auditor is otherwise required by law or regulation or decides to communicate key audit matters in the auditor’s report, the auditor shall do so in accordance with ISA (NZ) 701. (Ref: Para. A40-A43)

32. Where applicable, the auditor shall report in accordance with ISA (NZ) 720 (Revised)¹⁴.

Responsibilities for the Financial Statements

NZ33.1 The auditor’s report shall include a section with a heading “Responsibilities of Those Charged with Governance for the Financial Statements.” The auditor’s report shall use the term that is appropriate in the context of the legal framework in the particular jurisdiction. In New Zealand, the appropriate reference is usually to those charged with governance. In some jurisdictions, the appropriate reference may be to management. (Ref: Para. A44)

34. [Amended by the NZAuASB].

NZ34.1 This section of the auditor’s report shall describe the responsibilities of those charged with governance for: (Ref: Para. A45-A48)

1. Preparing the financial statements in accordance with the applicable financial reporting framework, and for such internal control as those charged with governance determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and

2. Assessing the entity’s ability to continue as a going concern¹⁵ and whether the use of the going concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to going concern. The explanation of the responsibilities of those charged with governance for this assessment shall include a description of when the use of the going concern basis of accounting is appropriate. (Ref: Para. A48)

35. This section of the auditor’s report shall also identify those responsible for the oversight of the financial reporting process, when those responsible for such oversight are different from those who fulfill the responsibilities described in paragraph 34 above. In this case, the heading of this section shall also refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal framework. (Ref: Para. A49)

36. When the financial statements are prepared in accordance with a fair presentation framework, the description of responsibilities for the financial statements in the auditor’s report shall refer to “the preparation and fair presentation of these financial statements” or “the preparation of financial statements that give a true and fair view,” as appropriate in the circumstances.

37. The auditor’s report shall include a section with the heading “Auditor’s Responsibilities for the Audit of the Financial Statements.”

38. This section of the auditor’s report shall: (Ref: Para. A50)

1. State that the objectives of the auditor are to:

   1. Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and

   2. Issue an auditor’s report that includes the auditor’s opinion. (Ref: Para. A51)

2. State that reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect a material misstatement when it exists; and

3. State that misstatements can arise from fraud or error, and either:

   1. Describe that they are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements; or ¹⁶

   2. Provide a definition or description of materiality in accordance with the applicable financial reporting framework. (Ref: Para. A52)

39. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report shall further: (Ref: Para. A50)

1. State that, as part of an audit in accordance with ISAs (NZ), the auditor exercises professional judgement and maintains professional scepticism throughout the audit; and

2. Describe an audit by stating that the auditor’s responsibilities are:

   1. To identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error; to design and perform audit procedures responsive to those risks; and to obtain audit evidence that is sufficient and appropriate to provide a basis for the auditor’s opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

   2. To obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. In circumstances when the auditor also has a responsibility to express an opinion on the effectiveness of internal control in conjunction with the audit of the financial statements, the auditor shall omit the phrase that the auditor’s consideration of internal control is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

   3. To evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

   4. To conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If the auditor concludes that a material uncertainty exists, the auditor is required to draw attention in the auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the opinion. The auditor’s conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause an entity to cease to continue as a going concern.

   5. When the financial statements are prepared in accordance with a fair presentation framework, to evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

3. When ISA (NZ) 600 (Revised)¹⁷ applies, further describe the auditor’s responsibilities in a group audit engagement by stating that:

   1. The auditor’s responsibilities are to plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements;

   2. The auditor is responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit; and

   3. The auditor remains solely responsible for the auditor’s opinion.¹⁸

40. The Auditor’s Responsibilities for the Audit of the Financial Statements section of the auditor’s report also shall: (Ref: Para. A50)

1. State that the auditor communicates with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit;

2. [Amended by the NZAuASB].

NZ40(b)(1) For audits of FMC reporting entities considered to have a higher level of public accountability, state that the auditor provides those charged with governance with a statement that the auditor has complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on the auditor’s independence, and where applicable, actions taken to eliminate threats or safeguards applied; and

(c) [Amended by the NZAuASB].

NZ40(c)1 For audits of financial statements of FMC reporting entities considered to have a higher level of public accountability and any other entities for which key audit matters are communicated in accordance with ISA (NZ) 701, state that, from the matters communicated with those charged with governance, the auditor determines those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. The auditor describes these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. (Ref: Para. A53)

41. The description of the auditor’s responsibilities for the audit of the financial statements required by paragraphs 38–39 shall be included: (Ref: Para. A54)

1. Within the body of the auditor’s report;

2. Within an appendix to the auditor’s report, in which case the auditor’s report shall include a reference to the location of the appendix; or (Ref: Para. A54-A55)

3. By a specific reference within the auditor’s report to the location of such a description on a website of an appropriate authority, where law, regulation or ISAs (NZ) expressly permit the auditor to do so. (Ref: Para. A54, A56–A57)

42. When the auditor refers to a description of the auditor’s responsibilities on a website of an appropriate authority, the auditor shall determine that such description addresses, and is not inconsistent with, the requirements in paragraphs 38–39 of this ISA (NZ). (Ref: Para. A56)

43. If the auditor addresses other reporting responsibilities in the auditor’s report on the financial statements that are in addition to the auditor’s responsibilities under the ISAs (NZ), these other reporting responsibilities shall be addressed in a separate section in the auditor’s report with a heading titled “Report on Other Legal and Regulatory Requirements” or otherwise as appropriate to the content of the section, unless these other reporting responsibilities address the same topics as those presented under the reporting responsibilities required by the ISAs (NZ) in which case the other reporting responsibilities may be presented in the same section as the related report elements required by the ISAs (NZ). (Ref: Para. A58–A60)

44. If other reporting responsibilities are presented in the same section as the related report elements required by the ISAs (NZ), the auditor’s report shall clearly differentiate the other reporting responsibilities from the reporting that is required by the ISAs (NZ). (Ref: Para. A60)

45. If the auditor’s report contains a separate section that addresses other reporting responsibilities, the requirements of paragraphs 20–39 of this ISA (NZ) shall be included under a section with a heading “Report on the Audit of the Financial Statements.” The “Report on Other Legal and Regulatory Requirements” shall follow the “Report on the Audit of the Financial Statements.” (Ref: Para. A60)

46. [Amended by the NZAuASB].

NZ46.1 The name of the engagement partner shall be included in the auditor’s report on financial statements of FMC reporting entities considered to have a higher level of public accountability unless, in rare circumstances, such disclosure is reasonably expected to lead to a significant personal security threat. In the rare circumstances that the auditor intends not to include the name of the engagement partner in the auditor’s report, the auditor shall discuss this intention with those charged with governance to inform the auditor’s assessment of the likelihood and severity of a significant personal security threat. (Ref: Para. A61–A63)

47. The auditor’s report shall be signed. (Ref: Para. A64–A65)

48. The auditor’s report shall name the location in the jurisdiction where the auditor practices.

49. The auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including evidence that: (Ref: Para. A66–A69)

1. All the statements and disclosures that comprise the financial statements have been prepared; and

2. Those with the recognised authority have asserted that they have taken responsibility for those financial statements.

50. If the auditor is required by law or regulation of a specific jurisdiction to use a specific layout, or wording of the auditor’s report, the auditor’s report shall refer to International Standards on Auditing (New Zealand) only if the auditor’s report includes, at a minimum, each of the following elements: (Ref: Para. A70–A71)

1. A title.

2. An addressee, as required by the circumstances of the engagement.

3. An Opinion section containing an expression of opinion on the financial statements and a reference to the applicable financial reporting framework used to prepare the financial statements (including identifying the jurisdiction of origin of the financial reporting framework that is not International Financial Reporting Standards or International Public Sector Accounting Standards, see paragraph 26).

NZ50(c)(1) The opinion paragraph shall identify the applicable financial reporting requirements issued by the New Zealand Accounting Standards Board used to prepare the financial statements.

1. An identification of the entity’s financial statements that have been audited.

2. A statement that the auditor is independent of the entity in accordance with the relevant ethical requirements relating to the audit, and has fulfilled the auditor’s other ethical responsibilities in accordance with these requirements. The statement shall identify the jurisdiction of origin of the relevant ethical requirements or refer to the IESBA Code.

NZ50(e)(1) In New Zealand, the independence statement shall refer to Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board.

1. Where applicable, a section that addresses, and is not inconsistent with, the reporting requirements in paragraph 22 of ISA (NZ) 570 (Revised).

2. Where applicable, a Basis for Qualified (or Adverse) Opinion section that addresses, and is not inconsistent with, the reporting requirements in paragraph 23 of ISA (NZ) 570 (Revised).

3. Where applicable, a section that includes the information required by ISA (NZ) 701, or additional information about the audit that is prescribed by law or regulation and that addresses, and is not inconsistent with, the reporting requirements in that ISA (NZ).¹⁹ (Ref: Para. A72–A73)

   1. Where applicable, a section that addresses the reporting requirements in paragraph 24 of ISA (NZ) 720 (Revised)²⁰.

4. [Amended by the NZAuASB].

NZ50(j)(1) A description of the responsibilities of those charged with governance for the preparation of the financial statements that addresses, and is not inconsistent with, the requirements in paragraphs 33–36.

1. A reference to International Standards on Auditing (New Zealand) and the law or regulation, and a description of the auditor’s responsibilities for an audit of the financial statements that addresses, and is not inconsistent with, the requirements in paragraphs 37–40. (Ref: Para. A50–A53)

2. [Amended by the NZAuASB].

NZ50(l)(1) For audits of complete sets of general purpose financial statements of FMC reporting entities considered to have a higher level of public accountability, the name of the engagement partner unless, in rare circumstances, such disclosure is reasonably expected to lead to a significant personal security threat.

1. The auditor’s signature.

2. The auditor’s address.

3. The date of the auditor’s report.

51. [Amended by the NZAuASB].

NZ51.1 An auditor is required to conduct an audit in accordance with the ISAs (NZ). Compliance with the ISAs (NZ) will also mean the auditor has complied with the International Standards on Auditing (ISAs) in the conduct of the audit. In this case, the auditor’s report may refer to International Standards on Auditing in addition to the International Standards on Auditing (New Zealand).

52. When the auditor’s report refers to both the national auditing standards and International Standards on Auditing, the auditor’s report shall identify the jurisdiction of origin of the national auditing standards.

53. If supplementary information that is not required by the applicable financial reporting framework is presented with the audited financial statements, the auditor shall evaluate whether, in the auditor’s professional judgement, supplementary information is nevertheless an integral part of the financial statements due to its nature or how it is presented. When it is an integral part of the financial statements, the supplementary information shall be covered by the auditor’s opinion.

54. If supplementary information that is not required by the applicable financial reporting framework is not considered an integral part of the audited financial statements, the auditor shall evaluate whether such supplementary information is presented in a way that sufficiently and clearly differentiates it from the audited financial statements. If this is not the case, then the auditor shall ask management to change how the unaudited supplementary information is presented. If management refuses to do so, the auditor shall identify the unaudited supplementary information and explain in the auditor’s report that such supplementary information has not been audited.

A1. Management makes a number of judgements about the amounts and disclosures in the financial statements.

A2. ISA (NZ) 260 (Revised) contains a discussion of the qualitative aspects of accounting practices.²¹ In considering the qualitative aspects of the entity’s accounting practices, the auditor may become aware of possible bias in management’s judgements. The auditor may conclude that the cumulative effect of a lack of neutrality, together with the effect of uncorrected misstatements, causes the financial statements as a whole to be materially misstated. Indicators of a lack of neutrality that may affect the auditor’s evaluation of whether the financial statements as a whole are materially misstated include the following:

A3. ISA (NZ) 540 addresses possible management bias in making accounting estimates.²² Indicators of possible management bias do not constitute misstatements for purposes of drawing conclusions on the reasonableness of individual accounting estimates. They may, however, affect the auditor’s evaluation of whether the financial statements as a whole are free from material misstatement.

A4. In evaluating whether the financial statements appropriately disclose the significant accounting policies selected and applied, the auditor’s consideration includes matters such as:

A5. Evaluating the understandability of the financial statements includes consideration of such matters as whether:

A6. It is common for financial statements prepared in accordance with a general purpose framework to present an entity’s financial position, financial performance and cash flows. Evaluating whether, in view of the applicable financial reporting framework, the financial statements provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the entity’s financial position, financial performance and cash flows includes consideration of such matters as:

A7. Some financial reporting frameworks acknowledge explicitly or implicitly the concept of fair presentation.²³ As noted in paragraph 7(b) of this ISA (NZ), a fair presentation²⁴ financial reporting framework not only requires compliance with the requirements of the framework, but also acknowledges explicitly or implicitly that it may be necessary for management to provide disclosures beyond those specifically required by the framework.²⁵

A8. The auditor’s evaluation about whether the financial statements achieve fair presentation, both in respect of presentation and disclosure, is a matter of professional judgement. This evaluation takes into account such matters as the facts and circumstances of the entity, including changes thereto, based on the auditor’s understanding of the entity and the audit evidence obtained during the audit. The evaluation also includes consideration, for example, of the disclosures needed to achieve a fair presentation arising from matters that could be material (i.e., in general, misstatements are considered to be material if theycould reasonably be expected to influence the economic decisions of the users taken on the basis of the financial statements as a whole), such as the effect of evolving financial reporting requirements or the changing economic environment.

A9. Evaluating whether the financial statements achieve fair presentation may include, for example, discussions with management and those charged with governance about their views on why a particular presentation was chosen, as well as alternatives that may have been considered. The discussions may include, for example:

A10. As explained in ISA (NZ) 200, the preparation of the financial statements by management and, where appropriate, those charged with governance requires the inclusion of an adequate description of the applicable financial reporting framework in the financial statements.²⁶ That description advises users of the financial statements of the framework on which the financial statements are based.

A11. A description that the financial statements are prepared in accordance with a particular applicable financial reporting framework is appropriate only if the financial statements comply with all the requirements of that framework that are effective during the period covered by the financial statements.

A12. A description of the applicable financial reporting framework that contains imprecise qualifying or limiting language (e.g., “the financial statements are in substantial compliance with New Zealand equivalents to International Financial Reporting Standards”) is not an adequate description of that framework as it may mislead users of the financial statements.

A13. In some cases, the financial statements may represent that they are prepared in accordance with two financial reporting frameworks (e.g., NZ IFRS and IFRSs). This may be because management is required, or has chosen, to prepare the financial statements in accordance with both frameworks, in which case both are applicable financial reporting frameworks. Such description is appropriate only if the financial statements comply with each of the frameworks individually. To be regarded as being prepared in accordance with both frameworks, the financial statements need to comply with both frameworks simultaneously and without any need for reconciling statements. In practice, simultaneous compliance is unlikely unless New Zealand has adopted the other framework as its own framework, or has eliminated all barriers to compliance with it.

A14. Financial statements that are prepared in accordance with one financial reporting framework and that contain a note or supplementary statement reconciling the results to those that would be shown under another framework are not prepared in accordance with that other framework. This is because the financial statements do not include all the information in the manner required by that other framework.

A15. The financial statements may, however, be prepared in accordance with one applicable financial reporting framework and, in addition, describe in the notes to the financial statements the extent to which the financial statements comply with another framework (e.g., financial statements prepared in accordance with NZ IFRS that also describe the extent to which they comply with IFRSs). Such description may constitute supplementary financial information as discussed in paragraph 54 and is covered by the auditor’s opinion if it cannot be clearly differentiated from the financial statements.

A16. There may be cases where the financial statements, although prepared in accordance with the requirements of a fair presentation framework, do not achieve fair presentation. Where this is the case, it may be possible for management to include additional disclosures in the financial statements beyond those specifically required by the framework or, in extremely rare circumstances, to depart from a requirement in the framework in order to achieve fair presentation of the financial statements.

A17. It will be extremely rare for the auditor to consider financial statements that are prepared in accordance with a compliance framework to be misleading if, in accordance with ISA (NZ) 210, the auditor determined that the framework is acceptable.²⁷

A18. A written report encompasses reports issued in hard copy and those using an electronic medium.

A19. The Appendix to this ISA (NZ) contains illustrations of auditor’s reports on financial statements, incorporating the elements set out in paragraphs 20–49. With the exception of the Opinion and Basis for Opinion sections, this ISA (NZ) does not establish requirements for ordering the elements of the auditor’s report. However, this ISA (NZ) requires the use of specific headings, which are intended to assist in making auditor’s reports that refer to audits that have been conducted in accordance with ISAs (NZ) more recognisable, particularly in situations where the elements of the auditor’s report are presented in an order that differs from the illustrative auditor’s reports in the Appendix to this ISA (NZ).

A20. A title indicating the report is the report of an independent auditor, for example, “Independent Auditor’s Report,” distinguishes the independent auditor’s report from reports issued by others.

A21. Law, regulation or the terms of the engagement may specify to whom the auditor’s report is to be addressed. The auditor’s report is normally addressed to those for whom the report is prepared, often either to the shareholders or to those charged with governance of the entity whose financial statements are being audited.

A22. The auditor’s report states, for example, that the auditor has audited the financial statements of the entity, which comprise [state the title of each financial statement comprising the complete set of financial statements required by the applicable financial reporting framework, specifying the date or period covered by each financial statement] and notes to the financial statements, including a summary of significant accounting policies.

A23. When the auditor is aware that the audited financial statements will be included in a document that contains other information, such as an annual report, the auditor may consider, if the form of presentation allows, identifying the page numbers on which the audited financial statements are presented. This helps users to identify the financial statements to which the auditor’s report relates.

A24. The phrases “present fairly, in all material respects,” and “give a true and fair view” are regarded as being equivalent. Whether the phrase “present fairly, in all material respects,” or the phrase “give a true and fair view” is used is determined by the law or regulation governing the audit of financial statements, or by generally accepted practice. Where law or regulation requires the use of different wording, this does not affect the requirement in paragraph 14 of this ISA (NZ) for the auditor to evaluate the fair presentation of financial statements prepared in accordance with a fair presentation framework.

A25. When the auditor expresses an unmodified opinion, it is not appropriate to use phrases such as “with the foregoing explanation” or “subject to” in relation to the opinion, as these suggest a conditional opinion or a weakening or modification of opinion.

A26. The auditor’s opinion covers the complete set of financial statements as defined by the applicable financial reporting framework. For example, in the case of many general purpose frameworks, the financial statements may include: a statement of financial position, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and related notes, which ordinarily comprise a summary of significant accounting policies and other explanatory information. In some cases, additional information may also be considered to be an integral part of the financial statements.

A27. In the case of financial statements prepared in accordance with a fair presentation framework, the auditor’s opinion states that the financial statements present fairly, in all material respects, or give a true and fair view of, the matters that the financial statements are designed to present. For example, in the case of financial statements prepared in accordance with NZ IFRS, these matters are the financial position of the entity as at the end of the period and the entity’s financial performance and cash flows for the period then ended. Consequently, the […] in paragraph 25 and elsewhere in this ISA (NZ) is intended to be replaced by the words in italics in the preceding sentence when the applicable financial reporting framework is NZ IFRS or, in the case of other applicable financial reporting frameworks, be replaced with words that describe the matters that the financial statements are designed to present.

A28. The identification of the applicable financial reporting framework in the auditor’s opinion is intended to advise users of the auditor’s report of the context in which the auditor’s opinion is expressed; it is not intended to limit the evaluation required in paragraph 14. The applicable financial reporting framework is identified in such terms as:

“… in accordance with International Financial Reporting Standards” or

“… in accordance with accounting principles generally accepted in Jurisdiction X …”

NZA28.1 Examples of applicable financial reporting requirements in New Zealand (and which are issued by the New Zealand Accounting Standards Board) are the following:

“… in accordance with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS)”;

“… in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime (NZ IFRS RDR)”;

“… in accordance with Public Benefit Entity Standards (PBE Standards)”;

“… in accordance with Public Benefit Entity Standards Reduced Disclosure Regime (PBE Standards RDR)”;

“… in accordance with Public Benefit Entity Simple Format Reporting – Accrual (Public Sector)”;

“… in accordance with Public Benefit Entity Simple Format Reporting – Accrual (Not- For-Profit)”;

“… in accordance with Public Benefit Entity Simple Format Reporting – Cash (Public Sector)”;

“… in accordance with Public Benefit Entity Simple Format Reporting – Cash (Not-For- Profit)”.

A29. When the applicable financial reporting framework encompasses financial reporting standards and legal or regulatory requirements, the framework is identified in such terms as “… in accordance with New Zealand equivalents to International Financial Reporting Standards and the requirements of Jurisdiction X Corporations Act.” ISA (NZ) 210 deals with circumstances where there are conflicts between the financial reporting standards and the legislative or regulatory requirements.²⁸

A30. As indicated in paragraph A13, the financial statements may be prepared in accordance with two financial reporting frameworks, which are therefore both applicable financial reporting frameworks. Accordingly, each framework is considered separately when forming the auditor’s opinion on the financial statements, and the auditor’s opinion in accordance with paragraphs 25–27 refers to both frameworks as follows:

1. If the financial statements comply with each of the frameworks individually, two opinions are expressed: that is, that the financial statements are prepared in accordance with one of the applicable financial reporting frameworks (e.g., NZ IFRS) and an opinion that the financial statements are prepared in accordance with the other applicable financial reporting framework (e.g., IFRSs). These opinions may be expressed separately or in a single sentence (e.g., the financial statements are presented fairly, in all material respects […], in accordance with NZ IFRS and with IFRSs).

2. If the financial statements comply with one of the frameworks but fail to comply with the other framework, an unmodified opinion can be given that the financial statements are prepared in accordance with the one framework (e.g., IFRSs) but a modified opinion given with regard to the other framework (e.g., NZ IFRS) in accordance with ISA (NZ) 705 (Revised).

A31. As indicated in paragraph A15, the financial statements may represent compliance with the applicable financial reporting framework and, in addition, disclose the extent of compliance with another financial reporting framework. Such supplementary information is covered by the auditor’s opinion if it cannot be clearly differentiated from the financial statements (see paragraphs 53–54 and related application material in paragraphs A78– A84). Accordingly,

1. If the disclosure as to the compliance with the other framework is misleading, a modified opinion is expressed in accordance with ISA (NZ) 705 (Revised).

2. If the disclosure is not misleading, but the auditor judges it to be of such importance that it is fundamental to the users’ understanding of the financial statements, an Emphasis of Matter paragraph is added in accordance with ISA (NZ) 706 (Revised), drawing attention to the disclosure.

A32. The Basis for Opinion section provides important context about the auditor’s opinion. Accordingly, this ISA (NZ) requires the Basis for Opinion section to directly follow the Opinion section in the auditor’s report.

A33. The reference to the standards used conveys to the users of the auditor’s report that the audit has been conducted in accordance with established standards.

A34. The identification of the jurisdiction of origin of relevant ethical requirements increases transparency about those requirements relating to the particular audit engagement. ISA (NZ) 200 explains that relevant ethical requirements ordinarily comprise Professional and Ethical Standard 1.²⁹ When the relevant ethical requirements include those of the IESBA Code, the statement may also make reference to the IESBA Code.

A35. In some cases, relevant ethical requirements may exist in several different sources, such as the ethical code(s) and additional rules and requirements within law and regulation. When the independence and other relevant ethical requirements are contained in a limited number of sources, the auditor may choose to name the relevant source(s) (e.g., the name of the code, rule or regulation applicable), or may refer to a term that is commonly understood and that appropriately summarises those sources (e.g., independence requirements for audits of private entities in Jurisdiction X).

A36. Law or regulation, or the terms of an audit engagement may require the auditor to provide in the auditor’s report more specific information about the sources of the relevant ethical requirements, including those related to independence that applied to the audit of the financial statements.

A37. In determining the appropriate amount of information to include in the auditor’s report when there are multiple sources of relevant ethical requirements relating to the audit of the financial statements, an important consideration is balancing transparency against the risk of obscuring other useful information in the auditor’s report.

A38. In group audits for which there are multiple sources of relevant ethical requirements, including those pertaining to independence, the reference in the auditor’s report to the jurisdiction ordinarily relates to the relevant ethical requirements that are applicable to the group auditor. This is because, in a group audit, component auditors are also subject to ethical requirements that are relevant to the group audit.³⁰

A39. The ISAs (NZ) do not establish specific independence or ethical requirements for auditors, including component auditors, and thus do not extend, or otherwise override, the independence requirements of the Professional and Ethical Standard 1 or other ethical requirements to which the group auditor is subject, nor do the ISAs (NZ) require that the component auditor in all cases to be subject to the same specific independence requirements that are applicable to the group auditor. As a result, relevant ethical requirements, including those pertaining to independence, in a group audit situation may be complex. ISA (NZ) 600 (Revised)³¹ provides guidance for auditors in performing work on the financial information of a component for a group audit, including those situations where the component auditor does not meet the independence requirements that are relevant to the group audit.

A40. [Amended by the NZAuASB].

NZA40.1 Law or regulation may require communication of key audit matters for audits of entities other than FMC reporting entities considered to have a higher level of public accountability, for example, entities characterised in such law or regulation as public interest entities.

A41. The auditor may also decide to communicate key audit matters for other entities, including those that may be of significant public interest, for example because they have a large number and wide range of stakeholders and considering the nature and size of the business. Examples of such entities may include financial institutions (such as banks, insurance companies, and pension funds), and other entities such as charities.

A42. [Amended by the NZAuASB].

NZA42.1 ISA (NZ) 210 requires the auditor to agree the terms of the audit engagement with those charged with governance and explains that the roles of management and those charged with governance in agreeing the terms of the audit engagement for the entity depend on the governance arrangements of the entity and relevant law or regulation.³² ISA (NZ) 210 also requires the audit engagement letter or other suitable form of written agreement to include reference to the expected form and content of any reports to be issued by the auditor.³³ When the auditor is not otherwise required to communicate key audit matters, ISA (NZ) 210³⁴ explains that it may be helpful for the auditor to make reference in the terms of the audit engagement to the possibility of communicating key audit matters in the auditor’s report and it may be necessary for the auditor to include a reference to such possibility in order to retain the ability to do so.

A43. [Amended by the NZAuASB].

NZA43.1 FMC reporting entities considered to have a higher level of public accountability are not common in the public sector. However, public sector entities may be significant due to size, complexity or public interest aspects. In such cases, an auditor of a public sector entity may be required by law or regulation or may otherwise decide to communicate key audit matters in the auditor’s report.

A44. [Amended by the NZAuASB].

NZA44.1 ISA (NZ) 200 explains the premise, relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit in accordance with ISAs (NZ) is conducted.³⁵ Management and, where appropriate, those charged with governance accept responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including, where relevant, their fair presentation. Management also accepts responsibility for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The description of the responsibilities of those charged with governance in the auditor’s report includes reference to both responsibilities as it helps to explain to users the premise on which an audit is conducted. ISA (NZ) 260 (Revised) uses the term those charged with governance to describe the person(s) or organisation(s) with responsibility for overseeing the entity, and provides a discussion about the diversity of governance structures across jurisdictions and by entity.

A45. There may be circumstances when it is appropriate for the auditor to add to the descriptions of the responsibilities of management and those charged with governance in paragraphs 34–35 to reflect additional responsibilities that are relevant to the preparation of the financial statements in the context of the nature of the entity.

A46. [Amended by the NZAuASB].

NZA46.1 ISA (NZ) 210 requires the auditor to agree the responsibilities of those charged with governance in an engagement letter or other suitable form of written agreement.³⁶ ISA (NZ) 210 provides some flexibility in doing so, by explaining that, if law or regulation prescribes the responsibilities of management and, where appropriate, those charged with governance in relation to financial reporting, the auditor may determine that the law or regulation includes responsibilities that, in the auditor’s judgement, are equivalent in effect to those set out in ISA (NZ) 210. For such responsibilities that are equivalent, the auditor may use the wording of the law or regulation to describe them in the engagement letter or other suitable form of written agreement. In such cases, this wording may also be used in the auditor’s report to describe the responsibilities as required by paragraph 34(a) of this ISA (NZ). In other circumstances, including where the auditor decides not to use the wording of law or regulation as incorporated in the engagement letter, the wording in paragraph 34(a) of this ISA (NZ) is used. In addition to including the description of the responsibilities of those charged with governance in the auditor’s report as required by paragraph 34, the auditor may refer to a more detailed description of these responsibilities by including a reference to where such information may be obtained (e.g., in the annual report of the entity or a website of an appropriate authority).

A47. [Amended by the NZAuASB].

NZA47.1 Law or regulation prescribing the responsibilities of those charged with governance may specifically refer to a responsibility for the adequacy of accounting books and records, or accounting system. As books, records and systems are an integral part of an entity’s system of internal control (as defined in ISA (NZ) 315 (Revised 2019)³⁷), the descriptions in ISA (NZ) 210 and in paragraph 34 do not make specific reference to them.

A48. The Appendix to this ISA (NZ) provides illustrations of how the requirement in paragraph 34(b) would be applied identifying the applicable financial reporting framework. If an applicable financial reporting framework other than those illustrated is used, the illustrative statements featured in the Appendix to this ISA (NZ) may need to be adapted to reflect the application of the other financial reporting framework in the circumstances.

A49. When some, but not all, of the individuals involved in the oversight of the financial reporting process are also involved in preparing the financial statements, the description as required by paragraph 35 of this ISA (NZ) may need to be modified to appropriately reflect the particular circumstances of the entity. When individuals responsible for the oversight of the financial reporting process are the same as those responsible for the preparation of the financial statements, no reference to oversight responsibilities is required.

A50. The description of the auditor’s responsibilities as required by paragraphs 37–40 of this ISA (NZ) may be tailored to reflect the specific nature of the entity, for example, when the auditor’s report addresses consolidated financial statements. Illustration 2 in the Appendix to this ISA (NZ) includes an example of how this may be done.

A51. The auditor’s report explains that the objectives of the auditor are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes the auditor’s opinion. These are in contrast to management’s responsibilities for the preparation for the financial statements.

A52. The Appendix to this ISA (NZ) provides illustrations of how the requirement in paragraph 38(c), to provide a description of materiality, would be applied identifying the applicable financial reporting framework. If an applicable financial reporting framework other than NZ IFRS is used, the illustrative statements presented in the Appendix to this ISA (NZ) may need to be adapted to reflect the application of the other financial reporting framework in the circumstances.

A53. The auditor may also consider it useful to provide additional information in the description of the auditor’s responsibilities beyond what is required by paragraph 40(c). For example, the auditor may make reference to the requirement in paragraph 9 of ISA (NZ) 701 to determine the matters that required significant auditor attention in performing the audit, taking into account areas of higher assessed risk of material misstatement or significant risks identified in accordance with ISA (NZ) 315 (Revised 2019); significant auditor judgements relating to areas in the financial statements that involved significant management judgement, including accounting estimates that have been identified as having high estimation uncertainty; and the effects on the audit of significant events or transactions that occurred during the period.

A54. Including the information required by paragraphs 39–40 of this ISA (NZ) in an appendix to the auditor’s report or, when law, regulation or ISAs (NZ) expressly permit, referring to a website of an appropriate authority containing such information may be a useful way of streamlining the content of the auditor’s report. However, because the description of the auditor’s responsibilities contains information that is necessary to inform users’ expectations of an audit conducted in accordance with ISAs (NZ), a reference is required to be included in the auditor’s report indicating where such information can be accessed.

A55. Paragraph 41 permits the auditor to include the statements required by paragraphs 39–40 describing the auditor’s responsibilities for the audit of the financial statements in an appendix to the auditor’s report, provided that appropriate reference is made within the body of the auditor’s report to the location of the appendix. The following is an illustration of how such a reference to an appendix could be made in the auditor’s report:

A56. Paragraph 41 explains that the auditor may refer to a description of the auditor’s responsibilities located on a website of an appropriate authority, only if expressly permitted by law, regulation or ISAs (NZ). The information on the website that is incorporated in the auditor’s report by way of a specific reference to the website location where such information can be found may describe the auditor’s work, or the audit in accordance with ISAs (NZ) more broadly, but it cannot be inconsistent with the description required in paragraphs 39–40 of this ISA (NZ). This means that the wording of the description of the auditor’s responsibilities on the website may be more detailed, or may address other matters relating to an audit of financial statements, provided that such wording reflects and does not contradict the matters addressed in paragraphs 39–40.

A57. An appropriate authority could be the External Reporting Board, a regulator, or an audit oversight body. Such organisations are well-placed to ensure the accuracy, completeness and continued availability of the standardised information. It would not be appropriate for the auditor to maintain such a website. The following is an illustration of how such a reference to a website could be made in the auditor’s report:

A58. In some engagements, the auditor may have additional responsibilities to report on other matters that are supplementary to the auditor’s responsibilities under the ISAs (NZ). For example, the auditor may be asked to report certain matters if they come to the auditor’s attention during the course of the audit of the financial statements. Alternatively, the auditor may be asked to perform and report on additional specified procedures, or to express an opinion on specific matters, such as the adequacy of accounting books and records, internal control over financial reporting or other information. Auditing standards often provide guidance on the auditor’s responsibilities with respect to specific additional reporting responsibilities.

A59. In some cases, the relevant law or regulation may require or permit the auditor to report on these other responsibilities as part of their auditor’s report on the financial statements. In other cases, the auditor may be required or permitted to report on them in a separate report.

A60. Paragraphs 43–45 of this ISA (NZ) permit combined presentation of other reporting responsibilities and the auditor’s responsibilities under the ISAs (NZ) only when they address the same topics and the wording of the auditor’s report clearly differentiates the other reporting responsibilities from those under the ISAs (NZ). Such clear differentiation may make it necessary for the auditor’s report to refer to the source of the other reporting responsibilities and to state that such responsibilities are beyond those required under the ISAs (NZ). Otherwise, other reporting responsibilities are required to be addressed in a separate section in the auditor’s report with a heading “Report on Other Legal and Regulatory Requirements,” or otherwise as appropriate to the content of the section. In such cases, paragraph 45 requires the auditor to include reporting responsibilities under the ISAs (NZ) under a heading titled “Report on the Audit of the Financial Statements.”

A61. [Amended by the NZAuASB].

NZA61.1 The objective of the firm in Professional and Ethical Standard 3³⁹ is to design, implement and operate a system of quality management that provides the firm with reasonable assurance that :

• The firm and its personnel fulfill their responsibilities in accordance with standards issued by the External Reporting Board or the New Zealand Auditing and Assurance Standards Board and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and

• Engagement reports issued by the firm or engagement partners are appropriate in the circumstances.

Notwithstanding the objective of Professional and Ethical Standard 3, naming the engagement partner in the auditor’s report is intended to provide further transparency to the users of the auditor’s report on financial statements of a FMC reporting entity considered to have a higher level of public accountability.

A62. [Amended by the NZAuASB].

NZA62.1 Law, regulation or ISAs (NZ) may require that the auditors’ report include the name of the engagement partner responsible for audits other than those of financial statements of FMC reporting entities considered to have a higher level of public accountability. The auditor may be required by law or regulation, or may decide to include additional information beyond the engagement partner’s name in the auditor’s report to further identify the engagement partner, for example, the engagement partner’s professional license number that is relevant to where the auditor practices.

A63. In rare circumstances, the auditor may identify information or be subject to experiences that indicate the likelihood of a personal security threat that, if the identity of the engagement partner is made public, may result in physical harm to the engagement partner, other engagement team members or other closely related individuals. However, such a threat does not include, for example, threats of legal liability or legal, regulatory or professional sanctions. Discussions with those charged with governance about circumstances that may result in physical harm may provide additional information about the likelihood or severity of the significant personal security threat. Law or regulation may establish further requirements that are relevant to determining whether the disclosure of the name of the engagement partner may be omitted.

A64. The auditor’s signature is either in the name of the audit firm, the personal name of the auditor or both, as appropriate. In addition to the auditor’s signature, the auditor may be required to declare in the auditor’s report the auditor’s professional accountancy designation or the fact that the auditor or firm, as appropriate, has been recognised by the appropriate licensing authority.

A65. In some cases, law or regulation may allow for the use of electronic signatures in the auditor’s report.

A66. The date of the auditor’s report informs the user of the auditor’s report that the auditor has considered the effect of events and transactions of which the auditor became aware and that occurred up to that date. The auditor’s responsibility for events and transactions after the date of the auditor’s report is addressed in ISA (NZ) 560.⁴⁰

A67. Since the auditor’s opinion is provided on the financial statements and the financial statements are the responsibility of management, the auditor is not in a position to conclude that sufficient appropriate audit evidence has been obtained until evidence is obtained that all the statements and disclosures that comprise the financial statements have been prepared and management has accepted responsibility for them.

A68. For some engagements, law or regulation identifies the individuals or bodies (e.g., the directors) that are responsible for concluding that all the statements and disclosures that comprise the financial statements have been prepared, and specifies the necessary approval process. In such cases, evidence is obtained of that approval before dating the report on the financial statements. For other engagements, however, the approval process is not prescribed in law or regulation. In such cases, the procedures the entity follows in preparing and finalising its financial statements in view of its management and governance structures are considered in order to identify the individuals or body with the authority to conclude that all the statements that comprise the financial statements, including the related notes, have been prepared. In some cases, law or regulation identifies the point in the financial statement reporting process at which the audit is expected to be complete.

A69. For some engagements, final approval of the financial statements by shareholders is required before the financial statements are issued publicly. For these engagements, final approval by shareholders is not necessary for the auditor to conclude that sufficient appropriate audit evidence has been obtained. The date of approval of the financial statements for purposes of ISAs (NZ) is the earlier date on which those with the recognised authority determine that all the statements and disclosures that comprise the financial statements have been prepared and that those with the recognised authority have asserted that they have taken responsibility for them.

A70. ISA (NZ) 200 explains that the auditor may be required to comply with legal or regulatory requirements in addition to ISAs (NZ).⁴¹ When the differences between the legal or regulatory requirements and ISAs (NZ) relate only to the layout and wording of the auditor’s report, the requirements in paragraph 50(a)–(o) set out the minimum elements to be included in the auditor’s report to enable a reference to the International Standards on Auditing (New Zealand). In those circumstances, the requirements in paragraphs 21–49 that are not included in paragraph 50(a)–(o) do not need to be applied including, for example, the required ordering of the Opinion and Basis for Opinion sections.

A71. Where specific requirements in law or regulation do not conflict with ISAs (NZ), the layout and wording required by paragraphs 21–49 of this ISA (NZ) assist users of the auditor’s report in more readily recognising the auditor’s report as a report of an audit conducted in accordance with ISAs (NZ).

Information Required by ISA (NZ) 701 (Ref: Para. 50(h))

A72. Law or regulation may require the auditor to provide additional information about the audit that was performed, which may include information that is consistent with the objectives of ISA (NZ) 701, or may prescribe the nature and extent of communication about such matters.

A73. The ISAs (NZ) do not override law or regulation that governs an audit of financial statements. When ISA (NZ) 701 is applicable, reference can only be made to ISAs (NZ) in the auditor’s report if, in applying the law or regulation, the section required by paragraph 50(h) of this ISA (NZ) is not inconsistent with the reporting requirements in ISA (NZ) 701. In such circumstances, the auditor may need to tailor certain aspects of the communication of key audit matters in the auditor’s report required by ISA (NZ) 701, for example by:

A74. ISA (NZ) 210 deals with circumstances where law or regulation prescribes the layout or wording of the auditor’s report in terms that are significantly different from the requirements of ISAs (NZ), which in particular includes the auditor’s opinion. In these circumstances, ISA (NZ) 210 requires the auditor to evaluate:

1. Whether users might misunderstand the assurance obtained from the audit of the financial statements and, if so,

2. Whether additional explanation in the auditor’s report can mitigate possible misunderstanding.

If the auditor concludes that additional explanation in the auditor’s report cannot mitigate possible misunderstanding, ISA (NZ) 210 requires the auditor not to accept the audit engagement, unless required by law or regulation to do so. In accordance with ISA (NZ) 210, an audit conducted in accordance with such law or regulation does not comply with ISAs (NZ). Accordingly, the auditor does not include any reference in the auditor’s report to the audit having been conducted in accordance with International Standards on Auditing (New Zealand).⁴²

A75. Auditors of public sector entities may also have the ability pursuant to law or regulation to report publicly on certain matters, either in the auditor’s report or in a supplementary report, which may include information that is consistent with the objectives of ISA (NZ) 701. In such circumstances, the auditor may need to tailor certain aspects of the communication of key audit matters in the auditor’s report required by ISA (NZ) 701 or include a reference in the auditor’s report to a description of the matter in the supplementary report.

A76. The auditor may refer in the auditor’s report to the audit having been conducted in accordance with both International Standards on Auditing as well as the New Zealand auditing standards when the auditor complies with each of the ISAs (NZ) relevant to the audit.⁴³

A77. A reference to both International Standards on Auditing and the national auditing standards is not appropriate if there is a conflict between the requirements in ISAs and those in the national auditing standards that would lead the auditor to form a different opinion or not to include an Emphasis of Matter or Other Matter paragraph that, in the particular circumstances, is required by ISAs. In such a case, the auditor’s report refers only to the auditing standards (either International Standards on Auditing or the national auditing standards) in accordance with which the auditor’s report has been prepared.

A78. In some circumstances, the entity may be required by law or regulation, or may voluntarily choose, to present together with the financial statements supplementary information that is not required by the applicable financial reporting framework. For example, supplementary information might be presented to enhance a user’s understanding of the applicable financial reporting framework or to provide further explanation of specific financial statement items. Such information is normally presented in either supplementary schedules or as additional notes.

A79. Paragraph 53 of this ISA (NZ) explains that the auditor’s opinion covers supplementary information that is an integral part of the financial statements because of its nature or how it is presented. This evaluation is a matter of professional judgement. To illustrate:

A80. Supplementary information that is covered by the auditor’s opinion does not need to be specifically referred to in the auditor’s report when the reference to the notes in the description of the statements that comprise the financial statements in the auditor’s report is sufficient.

A81. Law or regulation may not require that the supplementary information be audited, and management may decide to ask the auditor not to include the supplementary information within the scope of the audit of the financial statements.

A82. The auditor’s evaluation whether unaudited supplementary information is presented in a manner that could be construed as being covered by the auditor’s opinion includes, for example, where that information is presented in relation to the financial statements and any audited supplementary information, and whether it is clearly labelled as “unaudited.”

A83. Management could change the presentation of unaudited supplementary information that could be construed as being covered by the auditor’s opinion, for example, by:

A84. The fact that supplementary information is unaudited does not relieve the auditor of the responsibilities described in ISA (NZ) 720 (Revised).⁴⁴