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CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting

CA Nikhil has issued a qualified opinion on Kaveri Engineering Ltd.'s financial statements because directors' remuneration was not disclosed as the framework requires. The annual report, which is the other information, does not address or include directors' remuneration in any way. The matter affects no part of that other information. What is the correct conclusion under SA 720 (Revised)?

The qualification may have no impact on the required other information statement. The matter behind the qualification, non-disclosure of directors' remuneration, is not included in or addressed by the other information and affects no part of it. The auditor still considers implications but need not conclude the other information is misstated.

  1. AThe qualification may have no impact on the statement required in the other information section, since the matter is not included in or addressed by the other informationCorrect
  2. BThe auditor must always state that the other information is materially misstated
  3. CThe auditor must withdraw from the engagement because of the qualification
  4. DThe auditor must change the opinion to adverse, because other information and financial statements are linked

Explanation

SA 720 (Revised) says that a qualified or adverse opinion need not affect the statement required about other information. This is so when the modified matter is not included in or addressed by the other information and does not affect any part of it. Its own example is non-disclosure of directors' remuneration. The auditor still considers the implications, but here none arise. The other options assume consequences that the standard does not require.

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