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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

While auditing Ganga Foods Ltd, the statutory auditor finds that management has not provided some requested records, restricting the work he can perform. He concludes that the possible effects on the financial statements are material but not pervasive. Under the Standards on Auditing, which opinion is appropriate?

A qualified opinion is appropriate. The auditor could not obtain sufficient appropriate evidence because of a scope limitation, but the possible effects are material and not pervasive. A disclaimer would be used only if the effects were also pervasive, and an adverse opinion deals with material, pervasive misstatements.

  1. AUnmodified opinion with an emphasis of matter
  2. BQualified opinionCorrect
  3. CAdverse opinion
  4. DDisclaimer of opinion

Explanation

Under SA 705, when the auditor cannot obtain sufficient appropriate evidence and the possible effects are material but not pervasive, a qualified opinion ('except for') is issued. A disclaimer applies when effects are both material and pervasive. An adverse opinion relates to material and pervasive misstatements, not a scope limitation. An emphasis of matter does not modify the opinion.

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