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CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting

While auditing Bharat Foods Ltd., CA Nisha issues a qualified opinion because directors' remuneration was not disclosed as required by the applicable financial reporting framework. The Directors' Report, which is other information, does not mention directors' remuneration and no part of it is affected by this matter. Under SA 720 (Revised), what is the correct conclusion about the qualification's effect on the other-information reporting?

The qualification may have no impact on the statement about other information. The modified matter, non-disclosure of directors' remuneration, is not included or addressed in the Directors' Report and does not affect any part of it, so the auditor need not treat the other information as misstated because of it.

  1. AThe qualification may have no implications for the statement on other information, since the matter is not included or addressed in it and does not affect any part of itCorrect
  2. BThe auditor must automatically disclaim an opinion on the financial statements
  3. CThe auditor must always state that the other information is materially misstated
  4. DThe auditor must withdraw from the engagement

Explanation

SA 720 (Revised) gives this exact kind of example: a qualification for non-disclosure of directors' remuneration may have no implications for the other-information reporting if the matter is not in, and does not affect, the other information. The auditor still considers the implications, but here none arise. A disclaimer is contemplated only in rare cases involving doubts about management integrity.

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