CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits
During the audit of Sagar Foods Ltd, the auditor notes that management has not disclosed a related-party loan that was recorded under a different head. The auditor believes the misstatement is material but not pervasive. Under the Standards on Auditing, which type of opinion is appropriate if management refuses to correct it?
A qualified opinion is appropriate. Under the Standards on Auditing, a material but not pervasive misstatement that management declines to correct leads to an 'except for' opinion. Adverse requires pervasiveness, a disclaimer arises from inability to gather evidence, and emphasis of matter does not substitute for modification.
- AQualified opinionCorrect
- BUnmodified opinion with an emphasis of matter paragraph
- CAdverse opinion
- DDisclaimer of opinion
Explanation
Where a misstatement is material but not pervasive, the auditor expresses a qualified opinion ('except for'). An adverse opinion applies when the effect is both material and pervasive. A disclaimer arises from inability to obtain evidence, and an emphasis of matter cannot cure a known misstatement.
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