AUD, Auditing and Attestation

Sources for Reporting on Audit Engagements

Last reviewed 2026-09-14

The standards and authorities behind PocketCPA's AUD lessons on Reporting on Audit Engagements. The topic rests on AU-C 700.

About this topic

Everything an audit does ends up in one document, and almost nobody outside the firm ever sees anything else. This topic covers that document.

The reporting rules are heavily tested because the decisions are rule-driven.

Key points

• An unmodified opinion states the financial statements are presented fairly, in all material respects, in accordance with the framework.
• A qualified opinion is issued for a material but not pervasive misstatement or scope limitation.
• An adverse opinion is issued when a misstatement is both material and pervasive.
• A disclaimer is issued when the auditor cannot obtain sufficient appropriate evidence and the possible effects are both material and pervasive.

What the lessons cover

1. The unmodified opinion and report elements
2. Modified opinions (AU-C 705)
3. Added paragraphs (AU-C 706, 701, 570)
4. Going concern reporting (AU-C 570)
5. Consistency and other information (AU-C 708 and 720)
6. Comparative periods and predecessor auditors (AU-C 710)
7. Key audit matters and critical audit matters (AU-C 701)
8. Nonissuer and issuer reports side by side

Authoritative references

Where these requirements sit in the literature.

• AU-C 705.06 carries the definitions used when modifying the opinion, including modified opinion and pervasive, and is the paragraph a research task wants when the stem asks for the authoritative definition of pervasive.
• AU-C 705.07 is the trigger: modify the opinion when the statements as a whole are materially misstated, or when sufficient appropriate audit evidence cannot be obtained. AU-C 705.08 through .10 then select the type:
  • .08 qualified (a material but not pervasive misstatement, or possible effects that could be material but not pervasive).
  • .09 adverse (misstatements material and pervasive).
  • .10 disclaimer (evidence not obtainable, possible effects material and pervasive).
  • AU-C 705.A1 is the application material mapping the two axes onto those answers.
• AU-C 706.05 defines the two added paragraphs that do not modify the opinion:
  • emphasis-of-matter for a matter appropriately presented or disclosed in the statements and fundamental to users' understanding.
  • other-matter for a matter not presented in the statements but relevant to users' understanding of the audit, the auditor's responsibilities, or the report.
• AU-C 700 carries the restructured nonissuer report and the elimination of the pre-SAS 134 introductory and scope paragraphs, together with the unmodified opinion's language and its promise of reasonable assurance rather than a guarantee.
• AU-C 570 requires an unmodified opinion plus a separate section headed Substantial Doubt About the Entity's Ability to Continue as a Going Concern when doubt remains, the going concern basis is appropriate, and disclosure is adequate.
• AU-C 708 requires the auditor to evaluate whether comparability was materially affected by a change in accounting principle, and requires an emphasis-of-matter paragraph with an unmodified opinion when the change is preferable, properly applied and disclosed, and materially affects comparability.
• AU-C 720 confines the opinion to the financial statements and puts an uncorrected material misstatement of the other information in the Other Information section without modifying the opinion.
• AU-C 710 governs the comparative presentation, including the successor's other-matter paragraph where a predecessor audited the prior period and is not reissuing.
• AU-C 701 defines a key audit matter, conditions the communication on being engaged or required by law or regulation, and routes any matter driving a qualified or adverse opinion, or a material going concern uncertainty, into the relevant basis-for-modification or going concern section with only a cross-reference left in the KAM section.
• PCAOB AS 3101 fixes the issuer report.
  • Basic elements at .06 through .10.
  • Critical audit matters at .11 through .17 (the definition, the judgment factors and the note expecting at least one, the duty to communicate or state there are none, the four per-matter content requirements, the prescribed and no-CAM language, and documentation), with the exempt entities at .05.
  • At .18 and .19, the split between required explanatory language and an optional emphasis paragraph that footnote 36 says is never required.
• PCAOB AS 3105 is the issuer counterpart to AU-C 705.
  • The three departures at .01.
  • Except for wording and the ban on subject to at .04.
  • Client-imposed restrictions ordinarily leading to a disclaimer at .07.
  • The qualification pointing at possible effects at .09.
  • Pervasiveness as a materiality factor at .19.
  • Adverse at .40 through .43.
  • Disclaimers and their retitled sections at .44 through .47.
  • Piecemeal opinions prohibited at .48.
  • Comparatives at .49 through .58, including a differing updated opinion (.53), predecessor reissuance and its dating rule (.55 through .57), and the successor's paragraph when the predecessor's report is not presented (.58 and footnote 18).
• PCAOB AS 2415 is the issuer going concern standard.
  • The reasonable period at .02.
  • The explanatory paragraph and its required substantial doubt and going concern wording at .12 and .13, with conditional language barred by footnote 5.
  • Inadequate disclosure as a GAAP departure at .14.
  • The bar on repeating a prior-period paragraph at .16.
• PCAOB AS 2710.04 through .06 set the issuer duty on other information.
  • Read it and consider material inconsistency, with no duty to corroborate.
  • On an unrevised inconsistency, communicate to the audit committee and consider an explanatory paragraph, withholding use of the report, or withdrawing.
  • On a material misstatement of fact, discuss it, propose the client consult another party, and if it remains communicate in writing to the client and the audit committee.

How PocketCPA uses these sources

Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.

See also

• Sources for every AUD topic
• Free AUD sample questions
• The CPA exam glossary