CA Final · Advanced Auditing, Assurance and Professional Ethics · Specialised Areas
CA Rohan is auditing Kaveri Foods Pvt Ltd. Management has prepared a single financial statement, a statement of net assets, for a lender. Rohan is asked to give an opinion on only the schedule of trade receivables of the company, not the full set of financial statements. Under SA 805 (special considerations: audits of single financial statements and specific elements), what is the correct conclusion?
The auditor can accept the engagement under SA 805, applying the relevant SAs to the receivables schedule, and must keep that report separate from any report on a complete set of financial statements. A narrower scope alone does not require a modified opinion.
- AThe audit cannot be accepted because SA 805 applies only to a complete set of financial statements
- BThe auditor may accept the engagement, applying SA requirements as relevant, and the report on the element should not be combined with a report on the full financial statements unless clearly separatedCorrect
- CThe auditor must audit the entire financial statements before reporting on the receivables schedule, with the opinion on the schedule included in the same report
- DThe auditor must express the opinion on receivables as a modified opinion because the audit scope is limited
Explanation
SA 805 allows an audit of a single financial statement or a specific element, account or item. The auditor applies the relevant SAs to the extent applicable and must not issue the report on that element together with a report on the complete financial statements unless the two are clearly separated. A limited scope does not by itself imply a modified opinion, and the standard does not require auditing the complete set first.
Did you get it right without looking?
One question tells you little. A timed set on Specialised Areas shows your real accuracy, how long you take and where you lose marks.