Page 154 - CA Final PARAM Digital Book.

o Mitigating factors are one which reduces material uncertainty, so sometimes mitigating factors
may nullify material uncertainty.
o There can be circumstances where material uncertainty exists but still chances / probability of
going concern in next 12 months are more and going concern is valid.

QNO Drafting Opinion (Material Uncertainty & No Disclosure in FST) Old Course -- (M22M, M23M)
94.500 TITANIUM CNO--Unique
In the financial year 2020-21, Shreyansh Ltd. faced an extraordinary event (earthquake), which destroyed a
lot of business activity of the company. These circumstances indicate material uncertainty on the company’s
ability to continue as going concern. Due to such event, it may not be possible for the company to realize
its assets or pay off the liabilities during the regular course of its business. The financial statement
and notes to the financial statements of the company do not disclose this fact. What kind of opinion should
the statutory auditor of Shreyansh Ltd. issue in such circumstances and why? Also, draft the
opinion and basis for opinion para for the same.
Answer In the present case, there exists a material uncertainty that cast a significant doubt on the company’s ability
to continue as going concern and the same is not disclosed in the financial statements of Shreyansh Ltd.

As such, the financial statements of Shreyansh Ltd. for the FY 2020-21 are materially misstated and the effect
of the misstatement is so material and pervasive on the financial statements that giving only a qualified
opinion will be insufficient and therefore the statutory auditor of Shreyansh Ltd . should issue an adverse
opinion.

The relevant extract of the Adverse Opinion Paragraph and Basis for Adverse Opinion paragraph is as under:

Adverse Opinion
In our opinion, because of the omission of the information mentioned in the Basis for Adverse Opinion
section of our report, the accompanying financial statements do not present fairly, the financial position of
Shreyansh Ltd. as at March 31, 2021, and of its financial performance and its cash flows for the year then
ended in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of
India.

Basis for Adverse Opinion
Shreyansh Ltd. has faced an extraordinary event (earthquake), which destroyed a lot of business activity of
the company. Due to such event, it may not be possible for the company to realize its assets or pay off the
liabilities during the regular course of its business. This situation indicates that a material uncertainty
exists that may cast significant doubt on the Company’s ability to continue as a going concern. The
financial statement and notes to the financial statements of the company do not disclose this fact.

QNO Material uncertainty Not Disclosed Old Course- (N22M, M23R)
94.600 TITANIUM CNO--SA570.060
CA.K is appointed statutory auditor of SEEK INDIA LTD under Companies Act, 2013 for the first time. The
company is preparing its accounts keeping in view applicable requirements of Division II of Schedule III of
Companies Act, 2013. On scrutiny of financial statements of company put up for audit, it was noticed that
notes to accounts show ageing of trade payables as per amended requirements of Schedule III of the
Companies Act, 2013.
The ageing schedule forming part of notes is as under: -
Outstanding for following periods from due date of payment (` In crore)

Particulars Less than 1 1-2 years 2-3 years More than Total
year 3 years

MSME NIL NIL NIL NIL NIL
Others 2 4 3 1 10
Disputed dues- NIL NIL NIL NIL NIL
MSME
Disputed dues- NIL NIL NIL NIL NIL
others

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