CA Intermediate · Auditing and Ethics · Audit Report
While auditing Kaveri Textiles Ltd for the year ended 31 March 2026, the auditor of the company obtains sufficient appropriate evidence and concludes that the financial statements are free from material misstatement. However, the auditor wants to draw users' attention to a note that describes a major fire at the company's godown after year-end, which is already properly disclosed. Which is the correct form of audit report?
The auditor should issue an unmodified opinion with an Emphasis of Matter paragraph. The fire is properly disclosed in the financial statements and is fundamental to users' understanding, so SA 706 permits drawing attention to it without modifying the opinion, since there is no misstatement or limitation of scope.
- AQualified opinion with a basis for qualified opinion paragraph
- BUnmodified opinion with an Emphasis of Matter paragraphCorrect
- CAdverse opinion with a basis for adverse opinion paragraph
- DDisclaimer of opinion with a Other Matter paragraph
Explanation
The matter is appropriately presented and disclosed in the financial statements, and it is fundamental to users' understanding. SA 706 therefore requires an Emphasis of Matter paragraph, and the opinion stays unmodified. A qualified opinion would be wrong because there is no misstatement or scope limitation.
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