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A88705 1 (2005-08-10)

handle is hein.gao/gaobadvws0001 and id is 1 raw text is: I & , G A 0 Comptroller General . Accountability * Integrity * Reliability of the United States United States Government Accountability Office Washington, DC 20548 August 10, 2005 Mr. James M. Sylph Technical Director International Auditing and Assurance Standards Board 545 Fifth Avenue, 14,i Floor New York, NY 10017 Subject: Proposed International Standard on Auditing (ISA) 705, Modifications to the Opinion in the Auditor's Report and proposed ISA 706, Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent Auditor's Report Dear Mr. Sylph: This letter provides the U.S. Government Accountability Office's (GAO) comments on the International Auditing and Assurance Standards Board's (JAASB) proposed ISAs 705 and 706 issued in March 2005. We support the IAASB's effort to enhance the guidance for issuing modifications to the auditor's opinion and for including emphasis of matter paragraphs and other matters paragraphs in the auditor's report. We also support its efforts to assure consistency of the proposed standards with ISA 700, The Independent Auditor's Report on a Complete Set of General Puipose Financial Statements. However, we have concerns with certain matters in the proposed standards that we discuss below. Proposed ISA 705 - Modifications to the Opinion While we agree with the IAASB's intent to provide additional guidance on circumstances that may result in a modification to the auditor's opinion and the type of opinion appropriate in the circumstances, we believe that: 1) The guidance does not adequately discuss the need for auditors to consider the fair presentation of the financial statements when they determine the type of opinion to issue. ISA 700.15 discusses extremely rare circumstances when applying the financial reporting framework results in misleading financial statements and states that in those circumstances auditors should consider the need to modify the auditors' report. We recommend adding a reference to ISA 700.15 or a discussion similar to ISA 700.15 to the section titled Circumstances Resulting in a Modification to the Auditor's Opinion in order to improve the clarity and completeness of the proposed standard and to assure consistency with ISA 700.

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