Skip to content

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

Auditor Lopez concludes that Nova Co's financial statements contain a material misstatement because a required note on related party transactions has been omitted. Management refuses to add it. Which action does ISA 705 require in the Basis for Opinion section?

Lopez must describe the omitted related party disclosure in the Basis for Opinion section and, unless law prohibits it, include the missing information where practicable and supported by sufficient evidence. A vague non-compliance statement is inadequate, and Key Audit Matters cannot replace a modified opinion.

  1. ADescribe the omitted disclosure and, unless prohibited by law, include the omitted information provided practicable and the auditor has obtained sufficient evidenceCorrect
  2. BState only that the financial statements do not comply with IFRS without further detail
  3. CDescribe the matter in a Key Audit Matters section and keep the opinion unmodified
  4. DDisclaim an opinion on the related party note while giving an unmodified opinion on the rest

Explanation

For a material omitted disclosure, ISA 705 requires the auditor to discuss it with those charged with governance, describe the nature of the omitted information in the basis section and, unless prohibited by law, include the omitted disclosures if practicable and sufficient evidence has been obtained. A vague statement is insufficient, and KAM cannot replace modification.

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