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e available. If such audit evidence cannot be obtained, this may constitute a limitation on the scope of the audit and the auditor considers the implications for the auditor’s report. However, in certain instances, a representation by management may be the only audit evidence that the auditor can reasonably expect to be available.
.100 In view of the particular characteristics of small entities, the auditor may judge it appropriate to obtain written representations from the owner-manager as to the completeness and accuracy of the accounting records and of the financial report (for example, that all income has been recorded). Such representations, on their own, do not provide sufficient audit evidence. The auditor assesses the representations in conjunction with the results of other relevant audit procedures, the auditor’s knowledge of the business and of its owner-manager, and considers whether, in the particular circumstances, it would be reasonable to expect other audit evidence to be available. The possibility of misunderstandings between the auditor and the owner-manager is reduced when oral representations are confirmed by the owner-manager in writing.
.101 Due to the nature of small entities, owner-managers may be of the opinion that it is not possible to provide certain specific representations. This may particularly be the case for the specific representations in AUS 210, AUS 526 and AUS 708 (refer paragraphs .37, .38, .84, .96 and .97 of this AGS). The auditor is encouraged to discuss with the owner-manager the reasons for obtaining such representations and the potential impact on the auditor’s report should such representations not be obtained. As noted in paragraph .22 of this AGS, it may be useful to discuss these representations with management when agreeing the terms of engagement.
AUS 702: The Audit Report on a General Purpose Financial Report
.102 The objective of any audit is for the auditor to obtain sufficient appropriate audit evidence to be able to express an opinion on the financial report. In many cases the auditor will be able to express an unqualified opinion on the financial report of small entities. However there may be circumstances that necessitate a modification of the auditor’s report.
Scope Limitations
.103 When the auditor is unable to design or carry out procedures to obtain sufficient appropriate audit evidence as to the completeness of accounting records, this may constitute a limitation in the scope of the auditor’s work. The limitation would lead to an “except for” opinion or, in circumstances where the possible effects of the limitation are so significant that the auditor is unable to express an opinion on the financial report, an inability to form an opinion.
.104 The following illustrative paragraphs may be used for this purpose:
Example of paragraphs for an auditor’s report qualified when completeness of accounting records is not substantiated—scope limitation that does not prevent the auditor from expressing an opinion
The company’s recorded sales include $X in respect of cash sales. There was no system of control over such sales on which we could rely for the purpose of our audit and there were no satisfactory audit procedures that we could perform to obtain reasonable assurance that all cash sales were properly recorded.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ou