An addendum to its FAQ has been released by the Institute of Chartered Accountants of India (ICAI), furnishing detailed clarifications on the newly rolled out “Auditor’s Opinion on Financial Statements” functionality in the UDIN (Unique Document Identification Number) portal. In between the heightened concerns, the clarifications have been received from the practitioners for the last-minute compliance revisions rolled out just days before the October 31 tax audit due date.
As per the Addendum on FAQs for Auditor’s Opinion, the field is obligatory for two categories-“GST & Tax Audit” and “Audit & Assurance Functions.” For these categories, members must declare whether the auditor’s opinion is applicable to the specific audit and, if so, specify the type of opinion (Unmodified, Qualified, Adverse, or Disclaimer), along with disclosure on Key Audit Matters (KAMs), Emphasis of Matter (EOM), Other Matter, and Material Uncertainty related to Going Concern.
Detailed FAQs are issued by the Institute of Chartered Accountants of India (ICAI) to specify the applicability and reporting requirements of the Auditor’s Opinion on Financial Statements under the Unique Document Identification Number (UDIN) system.
The FAQs are as follows
Q 1. Is the Opinion of the auditor concerning financial statements a compulsory field?
Ans: Yes, the Opinion of the auditor on financial statements is a compulsory field for two categories only – ‘GST & Tax Audit’ and ‘Audit & Assurance Functions’.
Q2. What should be entered in the Auditor’s Opinion on the financial statements functionality?
Ans: The portal exhibits the question: “Is the Auditor’s Opinion on financial statements applicable to this audit?” Two options are there: Yes / No.
If “Yes”:
- Select any one type of opinion from the dropdown (Unmodified, Qualified, Adverse, or Disclaimer).
- Select Yes/No for one or more of the additional reporting in Auditor’s Report – Key Audit Matter (KAM), Emphasis of Matter (EOM), Other Matter, and Material Uncertainty associated with the current concern.
- Select Entity Type from the dropdown – Listed or Non-Listed Entity.
- If Listed Entity is selected, proceed further.
- If Non-Listed Entity is selected, another dropdown will appear. Select the suitable type from the list, or select “Others” if not listed, and proceed further.
If “No”:
No additional fields will appear, and the member can move further.
Q 3. What would be a modified opinion?
Ans: As per SA 705 (Revised) – Modifications to the Opinion in the Independent Auditor’s Report, a modified opinion can be of three types: “Qualified Opinion”, “Adverse Opinion”, or “Disclaimer of Opinion” for giving a true and fair view on financial statements.
Below mentioned is an extract from SA 705 (Revised):
Types of Modified Opinions (Ref: Para. 2)
| Nature of Matter Giving Rise to the Modification | Auditor’s Judgement about the Pervasiveness of the Effects or Possible Effects on the Financial Statements |
| Material but Not Pervasive | |
| Financial statements are materially misstated | Qualified opinion |
| Inability to obtain sufficient appropriate audit evidence | Qualified opinion |
Q 4. At the time of generating UDIN, the portal sought whether ‘Opinion applies to this audit.’ In which situation is it appropriate to select ‘No’?
Ans: The option “No” needs to be selected solely where a true and fair view of the financial statements is not needed. SA 700 (Revised) – Forming an Opinion and Reporting on Financial Statements deals with the auditor’s obligation to form an opinion on the financial statements. The auditor, in forming that opinion, should conclude whether reasonable assurance has been received that the financial statements as a whole are free from material misstatement, whether due to scam or error.
Q 5. Whether the opinion of the auditor is needed in case of concurrent audit/stock audit/revenue audit / internal audit/valuation report/system audit/compilation engagements under SRS 4410?
Ans: In the case of the above-mentioned assignments, no opinion of the auditor is needed.
Q 6. Whether an Auditor’s Opinion on financial statements is needed for a tax audit under section 44AB of the Income Tax Act, 1961?
Ans: Towards a tax audit case, the auditor must provide an opinion concerning financial statements under Clause 3(b) of Form 3CB. Therefore, in the same case, the information for the opinion of the auditor towards the financial statements needs to be given at the time of generating UDIN.
The auditor under Clause 3 of Form 3CA and Clause 5 of Form 3CB, cites an opinion on the particulars given in Form 3CD. These clauses do not need an Auditor’s Opinion on the financial statements, as is needed under this functionality of UDIN.
Read Also: ICAI Unveils The Audit Quality Maturity Model Version 2.0
Q 7. Whether an Auditor’s Opinion on financial statements is needed for audits under the Maharashtra Charitable Trust Act?
Ans: Yes, under the Maharashtra Charitable Trust Act, an auditor must frame their opinion on the financial statements
Q 8. In what way does the auditor comply with the prerequisites where material uncertainty exists concerning the entity’s ability to continue as a going concern?
Ans: The reporting on Material Uncertainty of concern in the Auditor’s Report shall be as per SA 570 (Revised) – Going Concern and related technical literature of ICAI.
Q 9. Whether a modification in reporting under audit trail is mandated to be reported in this functionality of UDIN?
Ans: The auditor under rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, must report on specific aspects of the audit trail by making an explicit assertion in the audit report under “Report on Other Legal and Regulatory Requirements.” The auditor, during the reporting of the audit trail, can edit their opinion under this clause. It does not need modification under the main auditor’s opinion on the financial statements and therefore shall not need to be reported under the same functionality of UDIN.
Q 10. Whether a modification in reporting under Internal Financial Controls for Financial Reporting is needed to be reported under this functionality of UDIN?
Ans: The report of the auditor is needed as per section 143(3)(i) to specify whether the company has enough internal financial control systems towards financial reporting in place and the operating effectiveness of these controls. If deficiencies, either individually or collectively, lead to weaknesses, the auditor must assess whether a modified opinion on the company’s internal controls over financial reporting is necessary. A modified report concerning internal financial controls towards the financial reporting does not imply that the audit report on the financial statements must be modified and therefore shall not be needed to be reported under the same operations of UDIN.
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