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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

Mr. Desai, statutory auditor of Tulsi Retail Ltd, wants to emphasise a significant uncertainty about a pending tax litigation that is adequately disclosed in the financial statements. He is satisfied the disclosure is fair and does not otherwise modify his opinion. What is the appropriate way to draw attention to it?

He should add an Emphasis of Matter paragraph while keeping the opinion unmodified. Such a paragraph draws attention to a matter already adequately disclosed that is fundamental to users' understanding. Qualifying or disclaiming would be inappropriate because there is neither a misstatement nor a scope limitation.

  1. AInclude an Emphasis of Matter paragraph in the auditor's report without modifying the opinionCorrect
  2. BIssue a qualified opinion on the litigation
  3. CIssue a disclaimer of opinion
  4. DOmit it, since adequately disclosed matters can never be referred to in the report

Explanation

An Emphasis of Matter paragraph refers to a matter already properly presented or disclosed that is fundamental to users' understanding. It does not modify the opinion. Qualification or disclaimer would be wrong because the disclosure is adequate and evidence is available.

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