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CA Intermediate · Auditing and Ethics · Audit Report

While auditing Kaveri Textiles Ltd, the auditor finds that the financial statements are free from material misstatement, but the company's management has not allowed access to certain records of a branch, and the possible effect on the financial statements is material but not pervasive. What type of opinion should the auditor express?

A qualified opinion is appropriate. The auditor could not obtain sufficient appropriate evidence because of the access restriction, and the possible effects are material but not pervasive. SA 705 requires an 'except for' opinion in this case, while adverse or disclaimer opinions are reserved for pervasive effects.

  1. AUnmodified opinion with an Emphasis of Matter paragraph
  2. BQualified opinionCorrect
  3. CAdverse opinion
  4. DDisclaimer of opinion

Explanation

Under SA 705, when the auditor cannot obtain sufficient appropriate audit evidence and the possible effects are material but not pervasive, a qualified opinion ('except for') is expressed. An adverse opinion or disclaimer is for pervasive effects. An Emphasis of Matter paragraph cannot substitute for modification.

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