CA Intermediate · Auditing and Ethics · Audit Report
In the audit of Bharat Cables Ltd, the auditor identifies that the Other Information in the annual report (Directors' Report) obtained before the date of the auditor's report contains a material misstatement. Management refuses to correct it. What should the auditor do under SA 720 (Revised)?
The auditor should ask management to correct it, communicate with those charged with governance if it is not corrected, and then take appropriate action, including describing the uncorrected material misstatement in the Other Information section of the report. The opinion on the financial statements is not automatically modified.
- AIgnore it, since the Directors' Report is outside the financial statements
- BCommunicate with those charged with governance and, if uncorrected, take appropriate action such as describing it in the Other Information section of the report, or consider withdrawingCorrect
- CAutomatically give an adverse opinion on the financial statements
- DIssue a disclaimer of opinion on the financial statements
Explanation
SA 720 requires the auditor to request management to correct the misstatement, communicate with those charged with governance if refused, and take appropriate action, including describing the uncorrected misstatement in the Other Information section of the report. The opinion on the financial statements is not automatically modified because the opinion does not cover other information.
Did you get it right without looking?
One question tells you little. A timed set on Audit Report shows your real accuracy, how long you take and where you lose marks.
More Audit Report questions
- CA Nisha is the statutory auditor of Ganga Steels Ltd, which is listed. While finalising the report, she notes that the company's net worth …
- Auditor of Ganga Steels Ltd, a listed company, has concluded that a material uncertainty exists regarding going concern. Management has adeq…
- The auditor of Gupta Motors Ltd finds that the company has not provided for a Rs 90 lakh liability, material but not pervasive, and manageme…
- CA Meera is auditing Sunrise Pharma Ltd, a listed company. She could not obtain sufficient appropriate audit evidence on the existence of in…
- Auditor of Sagar Foods Ltd notes that the company has disclosed a major fire at its warehouse after the year-end. The disclosure in the note…
- In the audit of Sundaram Foods Ltd, the financial statements properly disclose a major fire at the main plant after year-end. It was a signi…