Singh & Associates, while carrying out statutory audit of Rubber Industries Limited, observed that debtors are not making payments invoice wise.…
CA Intermediate · Auditing and Ethics · PYQS · January 2025
Singh & Associates, while carrying out statutory audit of Rubber Industries Limited, observed that debtors are not making payments invoice wise. As the debtors constitute sixty percent of the total assets, so auditors requested management to provide external confirmations of all the debtors outstanding for an amount exceeding - 1.00 Lac. However, management resisted and no external confirmations were made available. Auditor firm has decided to disclaim an opinion on the financial statements and seek your guidance on amendments that should be made in the "Basis for Opinion" section and elements required by SA 700 (Revised) which need not to be included in the auditor's report. Guide them suitably. (4 Marks)
Suggested Answer and Working Notes:
In the given situation, since the audit firm has decided to disclaim an opinion on the financial statements, the auditor shall, in addition to the specific elements required by SA 700 (Revised) amend the heading "Basis for Opinion" to "Basis for Disclaimer of Opinion; and within this section, include a description of the matter giving rise to the modification. Further, when the auditor disclaims an opinion on the financial statements, the auditor's report shall not include the following elements required by SA 700 (Revised): (i) A reference to the section of the auditor's report where the auditor's responsibilities are described; and (ii) A statement about whether the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor's opinion.
Topics: Audit Report
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