Skip to content

CS Professional · Compliance Management, Audit and Due Diligence · Forming an Opinion and Reporting

Meridian Textiles Ltd, an Indian company, prepares its financial statements under the Accounting Standards prescribed under section 133 of the Companies Act, 2013. While forming the opinion, the auditor reads the notes and finds they do not mention which financial reporting framework was used to prepare the statements. Which of the following is the auditor required to do under SA 700 (Revised)?

The auditor must evaluate whether the financial statements adequately refer to or describe the applicable financial reporting framework. Naming the framework in the opinion gives users context but does not replace this evaluation, and an Emphasis of Matter paragraph cannot substitute for it.

  1. AEvaluate whether the financial statements adequately refer to or describe the applicable financial reporting frameworkCorrect
  2. BSkip this evaluation because the framework is identified only in the auditor's opinion paragraph
  3. CIssue an Emphasis of Matter paragraph instead of evaluating the description
  4. DLeave the framework out of the report because the company is Indian

Explanation

SA 700 (Revised) requires the auditor to evaluate whether the financial statements adequately refer to or describe the applicable financial reporting framework. The framework named in the opinion is meant to give users context. It does not replace this evaluation, so skipping it is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Forming an Opinion and Reporting shows your real accuracy, how long you take and where you lose marks.

Practise Forming an Opinion and ReportingFree diagnostic mock

More Forming an Opinion and Reporting questions