CA Intermediate · Auditing and Ethics · Audit Report
In the audit of Meridian Steels Ltd, the auditor has concluded that the financial statements give a true and fair view but identifies that the Directors' Report, the other information, contains a material misstatement. Management refuses to correct it after being asked. What is the auditor's appropriate response under SA 720 (Revised)?
The auditor should communicate with those charged with governance and describe the uncorrected material misstatement in the Other Information section of the report, leaving the financial statements opinion unmodified. Under SA 720 (Revised) the opinion does not cover other information, and withdrawal is not automatically required.
- AModify the opinion on the financial statements because other information is misstated
- BCommunicate with those charged with governance and describe the uncorrected material misstatement in the 'Other Information' section of the report, without modifying the opinion on the financial statementsCorrect
- CIgnore it, since the auditor has no responsibility for other information
- DWithdraw from the engagement immediately in every case
Explanation
SA 720 (Revised) requires the auditor to read the other information and, if a material misstatement remains uncorrected, to communicate with those charged with governance and take appropriate action, including describing the misstatement in the report's Other Information section. The opinion on the financial statements does not cover other information, so it is not modified for this. Withdrawal is not automatic.
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
- Auditor CA Neha is auditing Orion Auto Ltd, a listed company, and has identified a matter as a Key Audit Matter (KAM) relating to revenue re…
- Kaveri Pharma Ltd has disclosed in Note 22 a major fire at its main plant after the year end, which was a non-adjusting event properly discl…
- While reporting on the standalone financial statements of Bharat Cables Ltd under section 143(3) of the Companies Act, 2013, the auditor fin…
- CA Vikram is the auditor of Bharat Steels Ltd. While finalising the report he notes that the company has a going concern material uncertaint…
- CA Neha is auditing a listed company, Orion Steels Ltd, whose management uses the going concern basis. She finds material uncertainty about …
- While auditing Kaveri Textiles Ltd, the auditor concludes that the financial statements are free from material misstatement and prepared in …