Sa 700 frf

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ANJALI NEGI (Querist)
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19 April 2013 As per SA-700 Forming an opinion and reporting on Financial Statements (REVISED) Management may depart from requirements of financial reporting framework to achieve fair presentation of Financial statements but this is possible only in very few cases." Can anyone please give me a suitable example to clear out this stanza.

ANJALI NEGI

ANJALI NEGI (Querist)
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20 April 2013 Can anyone reply my question.....any experts ..

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Sure! Under SA 700 (Revised) - Forming an Opinion and Reporting on Financial Statements, the auditor recognizes that management may, in very rare cases, depart from the applicable financial reporting framework to achieve a fair presentation of the financial statements.

What does this mean?
Generally, financial statements must comply with the applicable accounting standards or framework (like IFRS, GAAP, Ind AS, etc.). But sometimes, strict application of those standards might not reflect the economic reality or provide a true and fair view. In such exceptional cases, management might deviate from the standards, and the auditor must evaluate whether that departure leads to a fair presentation overall.

Suitable example of such a departure:
Example:

Suppose a company has a rare or unprecedented transaction that is not adequately covered by existing accounting standards.

To give a true and fair view, management chooses an alternative accounting treatment which deviates from the letter of the standards but better reflects the substance of the transaction.

For instance, treating a certain expenditure as a capital expense instead of revenue expense to avoid misleading users about the company’s performance, when the relevant standard does not provide clear guidance.

Auditor’s role:
The auditor assesses whether the departure is justified and results in financial statements that are fair and not misleading.

The auditor includes an emphasis of matter or an other matter paragraph in the audit report, and may modify the opinion if necessary.

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