CA Intermediate · Auditing and Ethics · Audit Report
In the audit of Sunrise Pharma Ltd, the auditor could not obtain sufficient appropriate evidence about a material joint venture investment because management denied access to its records. The possible effects are material and pervasive. Which course is correct under SA 705 (Revised)?
The auditor should disclaim an opinion. When the auditor cannot obtain sufficient appropriate evidence and the possible effects of undetected misstatements are both material and pervasive, SA 705 (Revised) requires a disclaimer, not a qualified or adverse opinion.
- ADisclaim an opinion on the financial statementsCorrect
- BExpress a qualified opinion with an 'except for' statement
- CExpress an adverse opinion
- DExpress an unmodified opinion with a Key Audit Matter
Explanation
Inability to obtain sufficient appropriate audit evidence whose possible effects are material and pervasive requires a disclaimer of opinion. A qualified opinion would apply only if effects were material but not pervasive. An adverse opinion arises from misstatement, not evidence limitation.
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