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

The auditor of Sundaram Foods Ltd is drafting the report for the current year. The prior year's statements were audited by another auditor who gave an unmodified opinion. The auditor also wishes to draw attention to Note 14, which describes the effects of a fire at the company's plant, without modifying the opinion. Which approach follows the illustration in SA 706 (Revised), Appendix 3?

Use an Emphasis of Matter paragraph pointing to Note 14 on the fire, stating that the opinion is not modified. Use a separate Other Matter paragraph to disclose that another auditor audited the prior period and gave an unmodified opinion.

  1. AInclude the fire in Other Matter and the predecessor's audit in Emphasis of Matter
  2. BInclude both in a single Key Audit Matters paragraph, as KAMs replace both paragraphs
  3. CDraw attention to Note 14 in an Emphasis of Matter paragraph stating the opinion is not modified, and refer to the predecessor's unmodified opinion in an Other Matter paragraphCorrect
  4. DOmit both, because the opinion is unmodified

Explanation

The illustration uses an Emphasis of Matter paragraph pointing to the note on the fire and stating that the opinion is not modified. It uses a separate Other Matter paragraph to state that another auditor audited the prior-period statements and expressed an unmodified opinion. Swapping the two misuses the paragraphs, and KAMs are a distinct section with a different purpose.

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