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Hi tutor,
Can you please explain what are the differences between the following 2 situations which require to have a different opinion being issued? I’ve read and read again but they seem the same to me.
1) The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion but has concluded that the possible effects of any undetected misstatements could be material but not pervasive. – Qualified Opinion
2) The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion and has concluded that the possible effects of any undetected misstatements could be both material and not pervasive. – Disclaimer Opinion
Can you also explain this MCQ for me as well:
The auditor may wish to draw the users’ attention to a matter which is not presented or disclosed in the FS but which is relevant to the users’ understanding of the auditor’s report.
How would this affect the auditor’s report?
a) An emphasis of matter paragraph would be included
b) The audit opinion would be qualified.
c) An other matters paragraph would be included.
d) The auditor’s report would not be affected as the auditor’s report only refers to matters presented or disclosed in the FS.My answer is “c”, but the answer guide is “b”. Am I wrong in thinking that an “other matter paragraph” can be included in an unqualified opinion?
Thanks
Q1: all seems correct.
Q2: last line doesn’t make sense. I think it should say “…could be both material AND pervasive”. In which case a disclaimer is appropriate
MCQ: the key point is that the FS omit something that is important for users’ understanding. Therefore they cannot be true and fair. A qualification is appropriate.
Thank you gromit for the clarification on the 2 situations! I think you probably are right, and there could be a typo on the question. The 2 situations were taken out from a MCQ, but in the answer guide it gives different opinions on each, and it confuses me.
Can you explain in what situation there will be an “other matter paragraph” in an unqualified opinion?
An other matter para is needed when something in the directors’ report or chairman’s statement is inconsistent with the FS (and the FS are correct).
The audit report does not cover the directors’ report or chairman’s statement so there can’t be a qualified opinion if these are wrong. However, the auditor draws attention to the inconsistencies in the other matter paragraph.
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