Page 176 - CA Final PARAM Digital Book.

• The nature of the matter giving rise to the modification, that is, whether the financial statements
are materially misstated or, in the case of an inability to obtain sufficient appropriate audit evidence,
may be materially misstated; and
• The auditor’s judgment about the pervasiveness of the effects or possible effects of the matter on
the financial statements.
➢ Further, the auditor shall modify the opinion in the auditor’s report when the auditor concludes that
based on the audit evidence obtained, the financial statements as a whole are not free from material
misstatement.
Part III – Case Discussion
➢ In the present case, during the course of audit, CA Omkar obtained certain audit evidence which were not
consistent with the affirmation made in the financial statements.
Part IV -- Conclusion
➢ Therefore, CA Omkar should modify his report in accordance with SA 705- “Modifications to The Opinion
in The Independent Auditor’s Report.
➢ CA Omkar should issue either a qualified opinion or an adverse opinion depending upon the
circumstances of the case:
• CA Omkar shall express a qualified opinion when, having obtained sufficient appropriate audit
evidence, he concludes that misstatements, individually or in the aggregate, are material, but not
pervasive, to the financial statements.
• CA Omkar shall express an adverse opinion, when the auditor, having obtained sufficient appropriate
audit evidence, concludes that misstatements, individually or in the aggregate, are both material
and pervasive to the financial statements.
➢ Thus, since CA Omkar has obtained audit evidence which are inconsistent with the affirmations made in
the financial statement, CA Omkar should modify his opinion as per the circumstances of the case.

QNO Limitation on Scope. Old Course – (M19E, N20E, M22M)
119.000 TITANIUM CNO— SA705.060
After accepting the statutory audit of M/s All in One Ltd., a departmental store, you became aware of the
fact that management of the company have imposed certain limitations on the scope of your assurance
function which may adversely affect and result in your inability to obtain sufficient appropriate audit
evidence to discharge your responsibility required by the statute. Indicate the consequences and your
response to the limitations imposed by the management on your scope.

OR

While conducting audit of VED Ltd., you as an auditor are not only prevented in completing certain audit
procedures but also are not able to obtain audit evidence even by performing alternative procedures.
How you will deal with this situation?
Answer Consequence of an Inability to Obtain Sufficient Appropriate Audit Evidence Due to a
Management-Imposed Limitation after the Auditor Has Accepted the Engagement

➢ If, after accepting the engagement, the auditor becomes aware that management has imposed a
limitation on the scope of the audit that the auditor considers likely to result in the need to express
a qualified opinion or to disclaim an opinion on the financial statements, the auditor shall request
that management remove the limitation.

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