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In Medimade(J10) / Strawberry(J12) / Clarinet (J14) in the last paragraph examiner has mentioned that “A paragraph describing the matter giving rise to the modification will be included just before the opinion paragraph and this will clearly identify the lack of disclosure over the going concern uncertainty. The opinion paragraph will be amended to state ‘except for’ or the financial statements are not fairly presented / The basis for adverse opinion paragraph will require an explanation that the use of the going concern basis is inappropriate. The opinion paragraph will state that the financial statements do not present fairly or are not true and fair.”
Is it still necessary to write the above para?
I do not understand what you mean by “still necessary”. (Why do you think it might not be?)
Sir like I want to ask that in Clarinet question (J14), Since directors have agreed to include some disclosures , if they are adequate then an unmodified opinion will be given but this uncertainty will be mentioned in EOM matter para OR material uncertainty with respect to GC para?
And in the last para in examiner’s answer it is mentioned that” A paragraph describing the matter giving rise to the modification will be included just before the opinion paragraph and this will clearly identify the lack of disclosure over the going concern uncertainty. The opinion paragraph will be amended to state ‘except for’ or the accounts are not fairly presented.”
Instead of the above para , can we just write that A basis for modified opinion paragraph would be needed and would explain going concern uncertainty. The opinion paragraph would be qualified except for / The opinion paragraph would be adverse opinion and would state that F/S do not give true and fair view?
See page 25 of the AA notes.
If adequately disclosed (opinion unmodified), MURGC is now separate section and not an EoM paragraph.
If inadequately disclosed the audit opinion is modified (as you say qualified “except for”) and the basis of opinion would state that material uncertainty exists (as you say) and also that the financial statements do not adequately disclose this matter.
Ok, MURGC.
1)But still want to ask 1 thing, If disclosures are inadequate then audit opinion will need to be modified. Depending on the materiality of the issue, either qualified or an adverse opinion will be given. Right? We will write this na that depending on the materilaity of the issue either a qualified or adverse opinion will be given…..?
2) In the end can we write that since directors have refused to disclose, a basis for opinion paragraph would be needed and would state material uncertainty exist. The opinion paragraph would be qualified ‘except for’ OR would be adverse opinion and would state that F/s do not give true and fair view?
*2) In the end can we write that A basis for opinion paragraph would be needed and would state material uncertainty exist. The opinion paragraph would be qualified ‘except for’ OR would be adverse opinion and would state that F/s do not give true and fair view?
If there is only uncertainty we are not saying that the basis is not appropriate – we are only saying that there is a lack of disclosure in the notes – so it will qualified “except for … “. It is not pervasive because there’s nothing “wrong” with the SoFP, etc – it’s only the disclosure that is missing.
(An adverse opinion would be if the company was NOT a going concern but the financial statements have been prepared on a going concern basis – i.e. as a whole – this would be pervasive.)
1)But in book its mentioned that if Going concern assumption is appropriate but material uncertainty is not adequately disclosed , the auditor’s opinion will be modified – either a qualified or adverse opinion will be issued depending on the magnitude of the uncertainty?
2) In GC reporting issues, suppose company is GC but it is subject to material uncertainty , and management have not or inadequately disclosed it . So a qualified opinion is given then in this case in the end can we write that a “basis for qualified opinion paragraph would be needed after opinion paragraph and would state that material uncertainty exist. The opinion paragraph would be qualified except for.” Am I right or am I right required to add anything else in this?
3) In GC reporting issues, suppose company is not GC so F/s must be prepared on breakup basis. But management has refused to amend F/s so in such a case adverse opinion would be given. In the end can we write that a “basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. The opinion paragraph would be adverse opinion and would state that F/s do not give true and fair view.” Am I right or am I required to add anything else in this?
1) For any matter that may give risk to material misstatement the auditor should consider whether it is qualified or adverse – for the purpose of AA I suggest to you that it would be as I have described and a matter that requires an except for opinion.
2) and 3) are fine and I don’t think there would be anything else to add. It is most likely that auditor’s reports will be examined in Section A. Although it could come up in a Section B question it would only be a relatively small part.
1)Ok. And like when we say that basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. I want to ask that basis for adverse opinion paragraph comes after opinion para or before opinion para?
2) Between evidence generated by auditor and evidence created by 3rd parties, which 1 is more reliable? The one generated by auditor is more reliable?
1)Ok. And like when we say that basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. I want to ask that basis for adverse opinion paragraph comes after opinion para or before opinion para?
2) Between evidence generated by auditor and evidence created by 3rd parties, which 1 is more reliable? The one generated by auditor is more reliable?
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