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

Before signing the report on Narmada Steels Ltd, the auditor reviews the draft annual accounts. Which of the following is NOT one of the matters the auditor must evaluate under paragraph 13 of SA 700 (Revised)?

Whether the dividend policy maximises shareholder returns is not an evaluation required by the standard. The auditor evaluates policy disclosure, appropriateness of policies, reasonableness of estimates, quality of information, adequacy of disclosures and appropriateness of terminology, but not business decisions on dividends.

  1. AWhether the accounting estimates made by management are reasonable
  2. BWhether the information presented is relevant, reliable, comparable and understandable
  3. CWhether the company's dividend policy maximises shareholder returnsCorrect
  4. DWhether the terminology used, including the title of each financial statement, is appropriate

Explanation

Paragraph 13 lists evaluations of policy disclosure, appropriateness of policies, reasonableness of estimates, relevance, reliability, comparability and understandability of information, adequacy of disclosures, and appropriateness of terminology. The adequacy of a dividend policy in maximising returns is a business decision, not an audit evaluation under this paragraph.

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