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

During the audit of Himalaya Infra Ltd., the auditor finds a material misstatement in the other information. Management refuses to correct it, and its conduct casts serious doubt on the integrity of management and those charged with governance, calling into question the reliability of audit evidence in general. What action does SA 720 (Revised) recognise as possibly appropriate in these rare circumstances?

A disclaimer of opinion on the financial statements may be appropriate in rare circumstances, because management's refusal to correct a material misstatement in other information casts doubt on its integrity and on the reliability of audit evidence in general. An emphasis paragraph would be inadequate.

  1. ADisclaimer of opinion on the financial statementsCorrect
  2. BUnmodified opinion with an Emphasis of Matter paragraph only
  3. CAdverse opinion limited to the other information
  4. DIncluding the misstatement as a Key Audit Matter and continuing with an unmodified opinion

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 misstatement casts such doubt on management integrity that audit evidence in general becomes unreliable. An Emphasis of Matter paragraph does not address a loss of reliability of evidence.

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