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  • Changes to audit opinions
Article:

Changes to audit opinions

07 October 2020

The FRC expects changes to audit opinions in the next few months, in light of the current situation, so has worked with investors to prepare some guidance. This guidance is equally applicable to any UK charity that is subject to audit, whatever its legal form and irrespective of whether or not the audit is required by statute.

It’s important to note that this guidance does not change the way auditors report, but instead can help those reading accounts to understand why these modifications may be necessary. Modified audit reports are a trigger for the auditor to report a ‘matter of material significance’ to the relevant regulator – and this modification may be a concern for some stakeholders. We remind Trustees that a charity’s annual report and accounts do not only become public after they are filed with a regulator or after acceptance at an AGM. Instead, they become public documents, on request by virtue of the Charities Act 2011, as soon as the auditor signs them. 

The following extract from the FRC’s guidance and below flowchart, which explains the various audit opinions that may be encountered, may be helpful. 

Modifications of Independent Auditor’s Opinions and Reports 

Two key objectives of any auditor are to:

  • obtain sufficient, appropriate audit evidence to support their audit opinion, and then 
  • report their opinion on the financial statements based on the evidence obtained.  

The need for a modified opinion may arise because certain audit procedures cannot be performed (for example, physical inventory testing because of travel restrictions), and no other procedures can be undertaken to produce the required volume or quality of reliable audit evidence.

Alternatively, management’s key judgements in areas such as asset and liability valuations, or the assumptions and cashflow estimates underpinning the use of the going concern basis of accounting, may be difficult to support in the light of wider economic and political uncertainty, or not agreed by the auditor.


For further information on specific matters relating to the audit of charities, reference should be made to Audit Practice Note 11, issued by the FRC in 2017, which also includes general guidance on indicators of misstatements in charities’ financial statements. 

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