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AUDITOR’S REPORT QUESTION

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › AUDITOR’S REPORT QUESTION

  • This topic has 2 replies, 2 voices, and was last updated 9 months ago by Kim Smith.
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    Posts
  • June 2, 2022 at 9:48 pm #657173
    lfede09
    Participant
    • Topics: 6
    • Replies: 5
    • ☆

    Sir,
    Might you give me your feedback about the following:

    Scenario:
    Decker Ltd has an environmental report that says it earned over 50% of the revenue from sustainable product. Your audit has revealed that it has earned less than 20% revenue from the sustainable products.

    Question: Which of the following is the most appropriate type of audit report modification for Decker Ltd?

    1-Adverse opinion
    2-Qualified opinion
    3-Other Information Paragraph
    4- Emphasis of Matter Paragraph

    Here, the difference is material (revenue difference is at least 30%) so a modified opinion should be expressed, anyway it is not pervasive because this materiality does not affect the financial statements as a whole but just a part, so a qualified opinion “except for” should be expressed.
    does it make sense?

    Thank you in advance

    June 3, 2022 at 7:42 am #657189
    Kim Smith
    Keymaster
    • Topics: 102
    • Replies: 6947
    • ☆☆☆☆☆

    First, please allow me to correct the terminology – there is no such thing as a modified/unmodified report and the terms “modified/unmodified” and “modification” should be used ONLY to describe the audit OPINION (as shown by the matrix on page 41 of the notes). Anything else – EoM, Other matter para, MURGC (see page 37 of the notes) is a section/paragraph of additional information that does not affect the audit opinion.

    June 3, 2022 at 7:48 am #657192
    Kim Smith
    Keymaster
    • Topics: 102
    • Replies: 6947
    • ☆☆☆☆☆

    Re your Q – what you appear to have is an example of other information (see the bottom of page 29 of the notes).

    Assuming that the environmental report is to be published with the audited financial statements (e,g, in an annual report) it is “other information”. 50% is a misstatement in “other information” – which is not within the scope of the audit – so there can be no effect on the audit opinion.

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