CA Ram is the Statutory Auditor of RJ Ltd. for the financial year 2023-24. The company is engaged in the production of electronic products. During…

Auditor's duties in case of inconsistency in Audit evidence: SA 705, "Modifications to the Opinion in the Independent Auditor's Report", deals with auditor's responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with SA 700 (Revised), the auditor concludes that a modification to the auditor's opinion on the financial statements is necessary. The decision regarding which type of modified opinion is appropriate depends upon: (i) The nature of the matter giving rise to the modification, that is, whether the financial statements are materially misstated or, in the case of an inability to obtain sufficient appropriate audit evidence, may be materially misstated; and (ii) The auditor's judgement about the pervasiveness of the effects or possible effects of the matter on the financial statements. Further, the auditor shall modify the opinion in the auditor's report when the auditor concludes that based on the audit evidence obtained, that the financial statements as a whole are not free from material misstatement. In the present case, during the audit, CA Ram obtained certain audit evidence which was not consistent with the affirmation made in financial statements. Therefore, CA Ram should modify his report in accordance with SA 705. Since CA Ram has obtained audit evidence which is inconsistent with the affirmations made in the financial statements. CA Ram should modify his opinion as per the circumstances of the case. CA Ram shall express Qualified opinion when, having obtained sufficient appropriate audit evidence, he concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements.CA Ram shall express an Adverse opinion, where the auditor, having obtained sufficient appropriate evidence, concludes that misstatements, individually, or in the aggregate, are both material and pervasive to the financial statements.