Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

Auditor Kim is unable to attend the year-end inventory count of Ravi Co, and no alternative procedures can provide sufficient appropriate evidence. Inventory is material and the possible effects on the financial statements are both material and pervasive. What should Kim do?

Kim should issue a disclaimer of opinion. Where the auditor cannot obtain sufficient appropriate evidence and the possible effects are both material and pervasive, ISA 705 requires a disclaimer. An adverse opinion applies to identified pervasive misstatements, not to evidence limitations.

  1. AIssue a qualified opinion stating 'except for' the possible effects on inventory
  2. BIssue an adverse opinion because the financial statements are materially misstated
  3. CIssue an unmodified opinion with an Other Matter paragraph describing the limitation
  4. DIssue a disclaimer of opinion because possible effects are material and pervasiveCorrect

Explanation

Inability to obtain sufficient appropriate evidence with possible effects both material and pervasive requires a disclaimer. A qualified opinion would be for effects material but not pervasive. An adverse opinion is for known misstatements, not for evidence limitations, which is why that option is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Auditor's reports shows your real accuracy, how long you take and where you lose marks.

Practise Auditor's reportsFree diagnostic mock

More Auditor's reports questions