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Can you explain: If the component ac is not adjusted and audit opinion is qualified and modified report.
What should be the audit opinion and report modified or unmodified if the consolidate ac has been adjusted? And what if both not adjusted?
Katie, “If the component ac is not adjusted and audit opinion is qualified and modified report.” isn’t a question
“What should be the audit opinion and report modified or unmodified if the consolidate ac has been adjusted”
– that IS a question! If the subsidiary / component financial statements have been adjusted in line with the auditors’ request, and if the financial statements are now showing a true and fair view in the mind of the auditor, then no adjustment will be necessary to the auditors’ report.
It will give an unqualified opinion and be an unmodified report
“And what if both not adjusted” – both what?
If the component financial statements are not adjusted in line with the auditors’ request (and the auditor would not request adjustment if the proposed amendments were not material) then the report will be modified because the opinion would be qualified as an adverse opinion – a fundamental disagreement because the group financial statements do not show a true and fair view
OK?
Sorry Mike, I was a bit of rash on the wording in my question. Please answer the question again, as I don’t think you answered the question what I asked unclearly!
So the circumstance is the component was audited by a component auditor, I am doing the group audit. I found the component audit report is qualified except a provision is not provided (materialto both group and subsidiary ‘asset and profit.) And after communication with sub manager, and group manager and CWG, they won’t adjust the component’s financial statement.
So I decide to adjust the consolidated FS, the question is when I express my opinion, on the consolidated FS is free from material misstatement, and should I say it is TRue and fair view with EMphasis matter paragraph refer the adjustment?
Or should I give a qualified opinion except for “component’s material misstatement” the FStatments are show true and fair value?
Firstly, it’s not up to you to “So I decide to adjust the consolidated FS,”
These are not your financial statements to alter and if the client doesn’t want to alter them, so be it. You (the auditor) are not allowed to make any alterations
Now, material misstatement in the component and it’s material to the group.
Then the group audit report needs modification and the opinion needs to be qualified
The basis of the qualification will spell out clearly the grounds for the qualification and the wording sounds like an “except for” opinion (unless the material misstatement has a pervasive affect in which case it’s an adverse opinion “do not show a true and fair view)
It’s certainly NOT an emphasis of matter. An EOM shall not be used as an alternative to a qualification
OK now?
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