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

The auditor of Anand Retail Ltd finds that the note disclosing compliance with a second framework is misleading to users. Which treatment is correct under SA 700 (Revised)?

The auditor should express a modified opinion in accordance with SA 705 (Revised). Because the disclosure about compliance with the other framework is misleading, an Emphasis of Matter paragraph alone is inadequate; that is reserved for non-misleading disclosures fundamental to users' understanding.

  1. AExpress a modified opinion in accordance with SA 705 (Revised)Correct
  2. BAdd only an Emphasis of Matter paragraph and keep an unmodified opinion
  3. CAdd only an Other Matter paragraph
  4. DMention it in the Key Audit Matters section with no change in opinion

Explanation

If the supplementary disclosure about compliance with another framework cannot be clearly differentiated from the financial statements and is misleading, a modified opinion is expressed under SA 705 (Revised). An Emphasis of Matter paragraph is for non-misleading disclosures that are fundamental to understanding.

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