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

During the audit of Gupta Pharma Ltd., CA Rohan identifies a material misstatement in the other information. Management refuses to correct it despite repeated requests, and Rohan concludes that this refusal casts such doubt on the integrity of management and those charged with governance that the reliability of audit evidence in general is called into question. Which action is contemplated by SA 720 (Revised) in such rare circumstances?

A disclaimer of opinion on the financial statements may be appropriate. SA 720 (Revised) recognises this in rare cases where management's refusal to correct a material misstatement of other information casts such doubt on its integrity that the reliability of audit evidence in general is called into question.

  1. AA disclaimer of opinion on the financial statements may be appropriateCorrect
  2. BAn unmodified opinion with an Emphasis of Matter paragraph on the other information
  3. CAn unmodified opinion with a Key Audit Matter on management's refusal
  4. DAn adverse opinion only on the other information, with the financial statements opinion unchanged

Explanation

SA 720 (Revised) states that in rare circumstances a disclaimer of opinion on the financial statements may be appropriate when refusal to correct the material misstatement of the other information casts doubt on management integrity so as to question the reliability of audit evidence in general. An Emphasis of Matter or Key Audit Matter cannot resolve a pervasive evidence reliability problem. The auditor does not give an opinion on the other information, so an adverse opinion on it is not possible.

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