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

Sunrise Textiles Ltd's financial statements comply with the applicable framework and also disclose the extent of compliance with another framework. The disclosure is not misleading, but the auditor, CS Meera Iyer's audit team, judges it so important that it is fundamental to users' understanding of the financial statements. What should the auditor do?

The auditor adds an Emphasis of Matter paragraph under SA 706 (Revised) drawing attention to the disclosure. A modified opinion is needed only if the disclosure on the other framework is misleading; here it is not misleading but is fundamental to users' understanding.

  1. AExpress a modified opinion under SA 705 (Revised)
  2. BAdd an Emphasis of Matter paragraph under SA 706 (Revised) drawing attention to the disclosureCorrect
  3. CAdd an Other Matter paragraph and leave the opinion section silent
  4. DMake no reference, since the disclosure is not misleading

Explanation

Under the application material of SA 700 (Revised), if the disclosure on compliance with another framework is misleading, a modified opinion follows. If it is not misleading but is fundamental to users' understanding, an Emphasis of Matter paragraph is added. Option A fits only the misleading case.

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