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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

Zephyr Ltd's audited financial statements are published with a management report. Before the date of the auditor's report, the audit team of Marlow & Co reads the other information and finds a material inconsistency with the audited financial statements. Management refuses to correct it. The financial statements themselves are correct. What is the most appropriate action for the auditor under ISA 720 (Revised)?

The auditor should communicate with those charged with governance and describe the uncorrected material misstatement in an Other Information section of the auditor's report. The financial statements opinion is not modified, because that opinion does not extend to other information, which the auditor only reads and considers.

  1. AModify the opinion on the financial statements because other information is misstated
  2. BCommunicate with those charged with governance and include an Other Information section describing the uncorrected material misstatementCorrect
  3. CRemove the other information from the annual report on the auditor's authority
  4. DIgnore the matter because other information is outside the scope of the audit opinion

Explanation

Under ISA 720 (Revised), if management will not correct a material misstatement of other information, the auditor communicates with those charged with governance and describes the uncorrected misstatement in the Other Information section of the report. The opinion on the financial statements is not modified because the opinion does not cover other information, so option A is wrong.

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