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CMA Intermediate · Corporate Accounting and Auditing · Audit Report and Reporting under CARO

The financial statements of Himalaya Pharma Ltd state compliance with the Accounting Standards under section 133 of the Companies Act, 2013 and also disclose the extent of compliance with another framework. The auditor finds that this additional disclosure is misleading and cannot be clearly differentiated from the financial statements. What is the correct reporting under SA 700 (Revised)?

The auditor should express a modified opinion under SA 705 (Revised). Because the misleading supplementary disclosure cannot be clearly differentiated from the financial statements, it is covered by the opinion. An Emphasis of Matter is suitable only when the disclosure is not misleading but is fundamental.

  1. AExpress a modified opinion in accordance with SA 705 (Revised)Correct
  2. BAdd an Emphasis of Matter paragraph only
  3. CAdd an Other Matter paragraph only
  4. DIgnore the disclosure as it is supplementary

Explanation

SA 700 (Revised) says such supplementary information is covered by the opinion if it cannot be clearly differentiated from the financial statements. If the disclosure about compliance with the other framework is misleading, a modified opinion is expressed under SA 705 (Revised). An EOM would apply only if the disclosure were not misleading but fundamental to users' understanding.

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