CA Final · Advanced Auditing, Assurance and Professional Ethics · Prospective Financial Information and Other Assurance Services
CA Desai is engaged to report under SAE 3420 on pro forma financial information in the prospectus of Vedanta Foods Ltd. He concludes that the pro forma information has not been compiled, in all material respects, on the applicable criteria, so a modified opinion is appropriate. Management refuses to change it, and the law precludes publication of a prospectus with a modified opinion. Under the Indian version of the standard, which course is correct?
He should discuss the matter with the responsible party and, if it refuses to make the necessary changes, withdraw from the engagement or consider seeking legal advice. The option of withholding the report, found in ISAE 3420, has been deleted in SAE 3420 because it is not in vogue in India.
- AWithhold the report, as in ISAE 3420
- BDiscuss the matter with the responsible party and, if it does not agree to changes, withdraw from the engagement or consider seeking legal advice; withholding the report is not an option in IndiaCorrect
- CIssue an unmodified report and add an emphasis of matter
- DIssue the modified report and require the company to change the law's effect through SEBI
Explanation
ISAE 3420 para 32 lets the practitioner withhold the report, withdraw or consider legal advice. The Indian SAE 3420 deleted the option of withholding the report because that practice is not in vogue in India. The practitioner therefore discusses the matter, and if no change is agreed, withdraws or considers legal advice. Withholding is the key wrong choice.
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