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My audit report was qualified last year because no one could attend my stocktake

ISA (UK) 710 states that if the auditor’s report on the prior period as previously issued included a qualified opinion and the matter which gave rise to the modification is unresolved, the auditor shall modify the auditor’s opinion on the current period’s financial statements.

The impact of a qualified audit report in relation to stock will result in further qualifications for the next two financial periods. The reasons for this are driven by the requirement to audit the comparative information in the financial statements.

As an example, if an audit report dated 31 March 2020 was qualified based on the failure to gain assurance over the existence and completeness of stock due to the inability to attend the year-end inventory count as a result of Covid-19, it will also have an impact on the audit report for 2021 and 2022. This is as a result of the consequential effect on the cost of sales for 31 March 2021 (as the opening inventory position had not been sufficiently audited), and then for the 31 March 2022 year-end, where the unverified cost of sales is a comparative figure.

ISA710 paragraph 11(b) effectively means that as auditors, we will never have assurance over the 2020 stock figure as a result of non-attendance. The modification would be removed from 2023 onwards.

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