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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Group audits

Vantor Group has a significant component, Kesh Ltd, in a country where the group auditor cannot access the component auditor's working papers because of local law, and no alternative procedures can give sufficient appropriate evidence on Kesh, which is material and pervasive to the group. What is the appropriate effect on the group auditor's report?

The auditor should disclaim an opinion. The inability to obtain sufficient appropriate evidence on Kesh, a component that is material and pervasive, is a scope limitation under ISA 705. An adverse opinion applies to known misstatements, and emphasis or key audit matters paragraphs cannot cure a limitation.

  1. AInclude an emphasis of matter paragraph and give an unmodified opinion
  2. BDisclaim an opinion, because the inability to obtain evidence is material and pervasiveCorrect
  3. CGive an unmodified opinion and refer to the restriction in the key audit matters section
  4. DGive an adverse opinion, because the financial statements are materially misstated

Explanation

If the group team cannot obtain sufficient appropriate evidence and the possible effects are both material and pervasive, ISA 705 requires a disclaimer of opinion. An adverse opinion is for known misstatements, not scope limitations. Emphasis of matter or key audit matters cannot replace a modification.

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