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CS Professional · Compliance Management, Audit and Due Diligence · Forming an Opinion and Reporting

Before signing the report on Narmada Foods Ltd, the auditor notices that the notes to the financial statements never mention which accounting framework was used to prepare them. Under SA 700 (Revised), what must the auditor do?

The auditor must evaluate whether the financial statements adequately refer to or describe the applicable financial reporting framework. This is a required step in forming the opinion, so the auditor cannot ignore missing framework disclosure or merely paper over it with an Emphasis of Matter paragraph.

  1. AIgnore the point, as framework disclosure is the auditor's report's job alone
  2. BEvaluate whether the financial statements adequately refer to or describe the applicable financial reporting frameworkCorrect
  3. CDelay the report until the next general meeting
  4. DDescribe the framework in an Emphasis of Matter paragraph and treat the matter as closed

Explanation

SA 700 (Revised) requires the auditor to evaluate whether the financial statements adequately refer to or describe the applicable financial reporting framework. The duty lies with the auditor's evaluation, not on the report alone. An Emphasis of Matter paragraph does not replace this evaluation.

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