SA 700 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SA 700 sits at the end of the audit process. It tells the auditor how to move from the evidence gathered to an opinion, and when that opinion can be unmodified. This first part covers forming the opinion; the elements of the report itself are in part 2.
SA 700 (Revised), as effective for audits of financial statements for periods beginning on or after 1 April 2018, applies to an audit of a complete set of general purpose financial statements. ICAI may revise standards, so check icai.org for the current text. Accurate books of accounts and complete notes are what an unmodified opinion rests on. Section 143(9) of the Companies Act, 2013 requires auditors to comply with auditing standards; see auditor powers and duties under section 143.
The auditor forms an opinion on whether the financial statements are prepared, in all material respects, under the applicable financial reporting framework. To do that, the auditor concludes whether reasonable assurance has been obtained that the statements as a whole are not materially misstated, taking account of the evidence obtained, uncorrected misstatements, and a set of evaluations on accounting practices, policies, estimates, disclosures and the description of the framework. If so, the opinion is unmodified; if not, it is modified under SA 705.
Scope and objectives (paragraphs 1-6)
The standard deals with forming an opinion and with the form and content of the auditor's report (paragraph 1). SA 701 covers key audit matters, SA 705 modified opinions and SA 706 emphasis of matter and other matter paragraphs (paragraph 2). SA 700 applies to a complete set of general purpose financial statements, and also to audits where SA 800 or SA 805 applies (paragraph 3); see SA 800 and SA 805. The standard aims for a balance between consistent, comparable reporting worldwide and more informative reports, while allowing flexibility for local circumstances (paragraph 4).
The two objectives are to form an opinion based on an evaluation of the conclusions drawn from the evidence, and to express that opinion clearly in a written report (paragraph 6).
| Term (paragraph 7) | Plain meaning |
|---|---|
| General purpose financial statements | Statements prepared under a framework designed to meet the common needs of a wide range of users |
| Fair presentation framework | A framework that requires compliance and acknowledges that extra disclosure may be needed for fair presentation, or, in extremely rare cases, a departure from a requirement |
| Compliance framework | A framework that requires compliance but has neither acknowledgement |
| Unmodified opinion | The opinion when statements are prepared, in all material respects, under the applicable framework |
"Financial statements" means a complete set including the notes (paragraph 8). "Accounting Standards" covers those issued by ICAI, those notified under section 133 of the Companies Act, 2013 and the Rules, IFRSs and IPSASs, as applicable (paragraph 9).
Forming the opinion (paragraphs 10-15)
The auditor forms an opinion on whether the statements are prepared, in all material respects, under the applicable framework (paragraph 10). To do so the auditor concludes whether reasonable assurance has been obtained that the statements as a whole are not materially misstated, whether from fraud or error, taking account of three things (paragraph 11):
- whether sufficient appropriate evidence has been obtained, under SA 330;
- whether uncorrected misstatements are material, individually or in aggregate, under SA 450 (see SA 450); and
- the evaluations in paragraphs 12-15.
The evaluations
| Evaluation | Paragraph |
|---|---|
| Whether the statements follow the framework in all material respects, including the qualitative aspects of accounting practices and indicators of bias in management's judgements | 12 |
| Disclosure of significant accounting policies | 13(a) |
| Policies chosen and applied are consistent with the framework and appropriate | 13(b) |
| Management's accounting estimates are reasonable | 13(c) |
| Information is relevant, reliable, comparable and understandable | 13(d) |
| Disclosures let users understand the effect of material transactions and events | 13(e) |
| Terminology, including the title of each statement, is appropriate | 13(f) |
| For a fair presentation framework: overall presentation, structure and content, and whether the statements and notes represent the underlying transactions and events in a manner that achieves fair presentation | 14 |
| The framework is adequately referred to or described | 15 |
On qualitative aspects, the auditor may become aware of possible bias, and may conclude that the cumulative effect of lack of neutrality, together with uncorrected misstatements, causes the statements as a whole to be materially misstated. One indicator is selective correction, such as fixing misstatements that increase profit but leaving those that decrease it (A2). Indicators of bias in estimates are not misstatements of individual estimates but may affect this overall evaluation (A3; see SA 540 part 2). For general-purpose statements that show financial position, performance and cash flows, the auditor checks that disclosures enable users to understand the effect of material transactions on each (A4).
Describing the framework
The description of the framework tells users what the statements are based on (A5). A statement that the statements follow a particular framework is appropriate only if they comply with all of its requirements effective for the period (A6). Imprecise wording such as "substantial compliance" is not an adequate description (A7). If the statements claim to follow two frameworks, for example Accounting Standards and IFRSs, both apply and the statements must comply with both at the same time, without reconciling statements (A8). Statements prepared under one framework that reconcile to another are not prepared under the other (A9). They may, however, describe the extent of compliance with another framework in the notes, which may be supplementary information covered by the opinion if not clearly separable (A10).
The form of opinion (paragraphs 16-19)
| Circumstance | What the auditor does | Paragraph |
|---|---|---|
| Statements prepared, in all material respects, under the framework | Expresses an unmodified opinion | 16 |
| Statements as a whole are materially misstated, or the auditor cannot obtain sufficient appropriate evidence to conclude they are not | Modifies the opinion under SA 705 | 17 |
| Fair presentation framework, but fair presentation not achieved | Discusses with management, then decides whether to modify | 18 |
| Compliance framework | No need to evaluate fair presentation; in extremely rare cases where the statements are misleading, discusses with management and decides whether and how to communicate | 19 |
For a fair presentation framework, the statements may still fail fair presentation despite following the requirements, and management may be able to add disclosures or, in extremely rare cases, depart from a requirement (A11). It will be extremely rare for the auditor to consider statements under an acceptable compliance framework misleading (A12). An unmodified opinion cannot be worded "subject to" or "with the foregoing explanation", since these suggest a conditional opinion (A20, covered further in part 2).
Illustrative example
Alder Pharma Ltd is an invented listed company; all figures are illustrative. At the close of the audit, the auditor reviews a schedule showing Rs 1.2 crore of uncorrected misstatements, against a materiality level the audit team set earlier. Management corrected the three differences that reduced profit but left the two that increased it. The auditor notices the pattern as an indicator of lack of neutrality, discusses it with management and asks for all of them to be corrected. The auditor also checks that the notes say the statements follow the notified Accounting Standards and not "substantially" so. After management corrects the items and the remaining uncorrected amount is clearly immaterial, the auditor concludes the statements are prepared, in all material respects, under the framework and expresses an unmodified opinion.
Need help closing the books for audit?
A clean finish to the audit depends on an accounts team that corrects differences promptly, keeps notes complete and describes the framework accurately. TaxClue's books of accounts compliance support can help your team review disclosures and policies before they reach the auditor. For a worked layout of the report, see our draft on the standalone auditor's report format.
Key takeaways
- The opinion rests on evidence, uncorrected misstatements and a defined set of evaluations.
- Qualitative aspects matter, including selective correction of misstatements.
- The framework must be described accurately; "substantial compliance" is not acceptable.
- An unmodified opinion is given when the statements follow the framework in all material respects.
- Material misstatement or insufficient evidence leads to a modified opinion.
Read next
- SA 700 part 2: elements of the auditor's report
- SA 705: modifications to the opinion
- SA 450: uncorrected misstatements
- Standalone auditor's report format
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.