Audit · Standards on Auditing

Audit report format as per SA 700, with a worked example.

The exact structure of the independent auditor's report — Opinion, Basis for Opinion, Key Audit Matters, responsibilities — and how the wording changes for a modified opinion.

Reviewed July 2026
9 min read
CA Anil Agarwal & the TatvaBooks team

What is SA 700?

SA 700 (Revised), "Forming an Opinion and Reporting on Financial Statements," is the Standard on Auditing that governs how an auditor's report on a complete set of general-purpose financial statements is structured and worded. It sits at the centre of a family of related standards: SA 701 deals with Key Audit Matters, SA 705 (Revised) covers modifications to the opinion (qualified, adverse, disclaimer), and SA 706 (Revised) covers Emphasis of Matter and Other Matter paragraphs. Together these standards replaced the older, narrative-style audit report with a structured, section-headed format designed to be more informative to the reader.

For a practicing CA, SA 700 is not optional reading — it is the checklist your report must satisfy before you sign it. Missing a required section, or getting the sequence wrong, is a documentation deficiency an ICAI peer reviewer or quality reviewer will flag.

The structure of an SA 700 report

An unmodified (clean) auditor's report under SA 700 follows a fixed sequence of sections. The Opinion now comes first — a change from the pre-revision format, where responsibilities were described before the opinion was given.

Section	What it must contain
Title	"Independent Auditor's Report" — the word "Independent" distinguishes it from an internal or management report.
Addressee	As required by the engagement — typically the members of the company, per the terms of engagement or applicable law.
Opinion section	First section of the report. States what was audited (the financial statements, with period and entity named) and gives the opinion in unambiguous terms.
Basis for Opinion	Immediately follows the Opinion. States the audit was conducted per Standards on Auditing, refers to the auditor's responsibilities section, confirms independence per the Code of Ethics, and states that evidence obtained is sufficient and appropriate.
Key Audit Matters (KAM)	Required for listed entities (and where law/regulation requires or the auditor otherwise decides to report KAM). Matters of most significance in the audit, drawn from those communicated to those charged with governance.
Other Information	Where the entity has other information (e.g. Board's report) — describes the auditor's responsibility to read it and report material inconsistencies.
Management's Responsibility	For preparation of financial statements that give a true and fair view, for internal controls, and for assessing going concern.
Auditor's Responsibility	To obtain reasonable assurance about whether the financial statements are free from material misstatement, and to issue a report — includes reference to professional judgement, scepticism, and materiality.
Report on Other Legal and Regulatory Requirements	In India, this is where CARO 2020 reporting and the matters required under Section 143(3) of the Companies Act are covered.
Signature block	Firm name (or auditor's name), signature, membership number, firm registration number (ICAI), place and date of report.

Exact clause references under Section 143 of the Companies Act, 2013 and the current CARO notification change from time to time — verify the applicable clause numbers on the MCA / ICAI portal before finalising a statutory report.

Modified-opinion variants under SA 705

When the financial statements are materially misstated, or the auditor cannot obtain sufficient appropriate evidence, SA 700's clean-opinion wording is replaced with one of three modified forms under SA 705. The choice depends on two questions: is the issue material, and is it pervasive?

Opinion type	When issued	Typical wording
Unmodified (clean) opinion	Financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.	"In our opinion... the aforesaid financial statements give a true and fair view..."
Qualified opinion	A material (but not pervasive) misstatement exists, or the auditor could not obtain sufficient appropriate evidence on a material (but not pervasive) matter.	"Except for the effects of the matter described in the Basis for Qualified Opinion section... the financial statements give a true and fair view..."
Adverse opinion	A misstatement is both material and pervasive to the financial statements.	"...the financial statements do not give a true and fair view..."
Disclaimer of opinion	The auditor cannot obtain sufficient appropriate audit evidence, and the possible effects could be both material and pervasive.	"We do not express an opinion on the financial statements..."

In every modified report, the heading changes from "Basis for Opinion" to "Basis for Qualified Opinion," "Basis for Adverse Opinion," or "Basis for Disclaimer of Opinion" — and that section must clearly describe the matter giving rise to the modification, quantify its effect where practicable, and state why the auditor reached that view.

Worked example — unmodified audit report (extract)

Below is an illustrative extract of the Opinion and Basis for Opinion sections for a private limited company, showing the exact section order and core wording pattern under SA 700. This is a teaching illustration, not a template to copy verbatim into a statutory report — every report must be tailored to the actual engagement, entity, and applicable legal requirements, and CARO/Section 143(3) reporting must be added where applicable.

INDEPENDENT AUDITOR'S REPORT

To the Members of ABC Private Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of ABC Private Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2026, the Statement of Profit and Loss, and the Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2026, its profit and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the "Auditor's Responsibility for the Audit of the Financial Statements" section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company... This includes maintenance of adequate accounting records, safeguarding of assets, prevention and detection of frauds and other irregularities, selection and application of appropriate accounting policies, and design, implementation and maintenance of adequate internal financial controls.

Auditor's Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists...

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that... [books of account, internal financial controls, related party transactions, and other prescribed matters].

For XYZ & Associates

Chartered Accountants

Firm Registration No. 0XXXXXN

CA [Name]

Partner

Membership No. XXXXXX

Place: Pune
Date: [Report date]

UDIN: [to be generated at signing]

Illustrative only. The exact CARO clauses, Section 143(3) matters, and any additional reporting requirements applicable to a given financial year must be verified against the current MCA notification and ICAI guidance before use.

Practical notes and common pitfalls

Section order matters. A reviewer checks that Opinion precedes Basis for Opinion, which precedes KAM (if any), which precedes Other Information — reversing this sequence is a formatting deficiency even if the content is otherwise correct.
Don't skip KAM analysis for listed clients. Even if you conclude there are no matters requiring separate KAM disclosure beyond what's already in the Basis for Opinion, document that assessment — silence without a documented basis is a common peer-review finding.
Match the modification heading to the opinion. A "Qualified Opinion" paragraph must be followed by a "Basis for Qualified Opinion" heading — not a generic "Basis for Opinion." This is a frequent drafting slip when a report is adapted from a prior year's clean opinion.
UDIN is mandatory on every signed report — generate it within the prescribed window of signing, not after.
CARO applicability is entity-specific — not every company is covered, and the exceptions (thresholds, entity type) change with notifications. Confirm applicability before drafting the Other Legal and Regulatory Requirements section, and verify current CARO clause numbers on the MCA/ICAI portal rather than relying on a prior year's report.
Going concern wording is a separate assessment under SA 570 — if a material uncertainty exists, it needs its own heading ("Material Uncertainty Related to Going Concern") inserted immediately after Basis for Opinion, distinct from a qualification.

Where TatvaBooks fits

SA 700 governs how you report — it doesn't change what you're reporting on. The quality of that underlying data still decides how much audit work you do. TatvaBooks gives your audit clients GST-correct books, Schedule III-ready financial statements, and an append-only activity log, which cuts down the substantive testing and reconciliation work before you even get to drafting the opinion. See what a CA practice gets on the for Chartered Accountants page, or the pricing page for practice plans.

Frequently asked questions

What is SA 700 in auditing?

SA 700 (Forming an Opinion and Reporting on Financial Statements) is the Standard on Auditing issued under the ICAI framework that prescribes the structure, content and wording of the independent auditor's report on a complete set of general-purpose financial statements. It works alongside SA 701 (Key Audit Matters), SA 705 (Modifications to the Opinion) and SA 706 (Emphasis of Matter and Other Matter paragraphs).

What are the main sections of an SA 700 audit report?

In order: Title, Addressee, Opinion, Basis for Opinion, Key Audit Matters (where applicable), Other Information, Management's Responsibility for the Financial Statements, Auditor's Responsibility for the Audit of the Financial Statements, Report on Other Legal and Regulatory Requirements (CARO and Companies Act matters in India), and the signature block.

What is the difference between a qualified and an adverse opinion?

Both arise from a material misstatement or a scope limitation, but the difference is pervasiveness. A qualified opinion is issued when the effect is material but confined — isolated to a specific element or disclosure. An adverse opinion is issued when the effect is both material and pervasive, meaning it undermines the financial statements as a whole. Verify the exact SA 705 criteria on the ICAI portal before finalising a modified report.

Is Key Audit Matters mandatory for all companies?

No. SA 701 requires KAM reporting for audits of listed entities, and permits (or may require, depending on applicable law/regulation) it for other entities where the auditor judges it relevant or where regulation demands it. For most unlisted private companies, KAM is not mandatory. Confirm applicability against the current SA 701 scope and any sector-specific regulatory requirement before omitting it.

Does the auditor's report format change for CARO reporting?

Yes — CARO 2020 reporting (where applicable to the company) is addressed under the 'Report on Other Legal and Regulatory Requirements' section of the SA 700 format, along with the matters specified under Section 143(3) of the Companies Act, 2013 (books of account, internal financial controls, related party transactions, and similar). The CARO annexure itself is typically attached as a separate schedule referenced from this section.

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