CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting
While auditing Himalaya Pharma Ltd, the auditor issued a qualified opinion because directors' remuneration was not disclosed as the applicable financial reporting framework requires. The annual report's other information (Directors' Report and Management Discussion) does not mention directors' remuneration and nothing in it is affected by this matter. How should the auditor approach the statement required under SA 720 (Revised) about other information?
The qualified opinion may have no implication for the other-information statement. SA 720 (Revised) says that where the modified matter, such as non-disclosure of directors' remuneration, is not included or addressed in the other information and does not affect any part of it, the auditor need not report an uncorrected misstatement there.
- AThe qualified opinion may have no implications for the statement required, since the matter is not included or addressed in the other information and does not affect any part of itCorrect
- BThe auditor must always state that the other information is also materially misstated
- CThe auditor must withdraw from the engagement because the opinion is modified
- DThe auditor must convert the qualified opinion into an adverse opinion to cover the other information
Explanation
SA 720 (Revised) requires the auditor to consider the implications of the matter behind a qualified or adverse opinion for the other-information statement. The standard gives non-disclosure of directors' remuneration as an example where there may be no implication, because the matter is not in the other information and does not affect any part of it. The auditor therefore need not automatically report a misstatement in the other information.
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