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Hi!
How to address the situation and issue an appropriate opinion when there is disagreement as well as limitation of scope due to different matters?E.g. A material subsidiary is not been consolidated. Consequence: Adverse Opinion due to disagreement.
Moreover, Auditors are not able to obtain sufficient and appropriate evidence regarding over 90% of the entity’s net assets (of parent comapany). Consequence: Disclaimer of opinion.Now, which of the above affect should be reflected in the audit report, disagreement or limitation of scope?
What will be the basis of opinion and opinion itself in this example?Frankly, this looks like a situation where the auditors should have resigned!
Bothe elements should be brought to the attention of the members, the limitation first followed by the disagreement.
The opinion paragraph would possibly be along the lines of: becacause of the pervasive nature of the matters mentioned in the previous two paragraphs and in particular the paragraph concerning the omission of the material subsidiary results, in our opinion the financial statements do not show a true and fair view …….
Not only should the auditors have considered resignation – I doubt whether the directors are likely to continue in office for much time after the annual general meeting!
Remember, this is a public company and the directors are showing themselves to be totally lacking in appropriate competence!
Thank you for the answer.
Can you kindly provide an example, where the above (or similar) circumstances are implied in real life situation? So that I can understand the situation more effectively.
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