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CA Final · Advanced Auditing, Assurance and Professional Ethics · Sustainable Development Goals (SDG) & Environment, Social and Governance (ESG) Assurance

Tarang Textiles Ltd, a listed company, includes a voluntary sustainability section in its annual report stating that it has cut water consumption by 20%. CA Meera is the statutory auditor, and her audit report on the financial statements is already being finalised. The sustainability section is not part of the financial statements. What is Meera's responsibility under SA 720 (Revised) regarding this section?

The auditor must read the sustainability section and consider whether it is materially inconsistent with the financial statements or audit knowledge. If a material misstatement remains uncorrected, she reports it in the Other Information section. She does not give an opinion on it, nor can she compel its removal.

  1. ARead it and consider whether it is materially inconsistent with the financial statements or her audit knowledge, and report in the Other Information section if a material misstatement existsCorrect
  2. BPerform reasonable assurance procedures on the 20% figure and issue an opinion on it
  3. CIgnore it, as information outside the financial statements is outside the scope of the audit
  4. DRequire the company to remove it from the annual report before signing the audit report

Explanation

SA 720 (Revised) requires the auditor to read other information in the annual report and consider material inconsistency with the financial statements or knowledge obtained in the audit. If uncorrected material misstatement exists, it is reported under the Other Information section. Option B is wrong because no opinion is expressed on other information.

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