Page 178 - CA Final PARAM Digital Book.

• The financial statements are prepared by management of the entity in accordance with the
Accounting Standards issued by the Institute of Chartered Accountants of India (a general-purpose
framework).
• The terms of the audit engagement reflect the description of management’s responsibility for the
financial statements in SA 210.
• The auditor was unable to obtain sufficient appropriate audit evidence about multiple elements of
the financial statements, that is, the auditor was also unable to obtain audit evidence about the
entity’s inventories and accounts receivable.
• The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to
be both material and pervasive to the financial statements.
• The relevant ethical requirements that apply to the audit are ICAI’s Code of Ethics and applicable
law/regulation.
Those responsible for oversight of the financial statements differ from those responsible for the
preparation of the financial statements.

A more limited description of the auditor’s responsibilities section is required.
In addition to the audit of the financial statements, the auditor has other reporting responsibilities
required under relevant law/ regulation.
Answer ➢ Disclaimer of Opinion:
We were engaged to audit the financial statements of ABC & Associates (“the entity”), which
comprise the balance sheet as at March 31, 20XX, the statement of Profit and Loss, (the statement
of changes in equity)(where applicable) and statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies.

We do not express an opinion on the accompanying financial statements of the entity. Because of
the significance of the matters described in the Basis for Disclaimer of Opinion section of our report,
we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit
opinion on these financial statements.

➢ Basis for Disclaimer of Opinion
We were not appointed as auditors of the Company until after March 31, 20X1 and thus, did not
observe the counting of physical inventories at the beginning and end of the year. We were unable
to satisfy ourselves by alternative means concerning the inventory quantities held at March 31, 20X0
and 20X1, which are stated in the Balance Sheets at Rs xxx and Rs xxx, respectively. In addition, the
introduction of a new computerized accounts receivable system in September 20X1 resulted in
numerous errors in accounts receivable. As of the date of our report, management was still in the
process of rectifying the system deficiencies and correcting the errors. We were unable to confirm
or verify by alternative means accounts receivable included in the Balance Sheet at a total amount
of Rs xxx as at March 31, 20X1. As a result of these matters, we were unable to determine whether
any adjustments might have been found necessary in respect of recorded or unrecorded inventories
and accounts receivable, and the elements making up the statement of Profit and Loss (and
statement of cash flows) ( Where applicable).

QNO Drafting Disclaimer of Opinion Old Course – (N22R)
119.120 TITANIUM CNO— Unique New Course – (SM23)
CA Bahubali is the statutory auditor of Bharat Ltd. for the FY 2021-22. During the course of audit CA
Bahubali noticed the following:

(i) With respect to the debtors amounting to ₹ 240 crore, no balance confirmation was received by the
audit team. Further, there have been defaults on the payment obligations by debtors on the due dates

during the year under audit. The Company has created a provision for doubtful debts to the tune of ₹ 40
crore during the year under audit. The Company has stated that the provision is based on receivables
which are older than 39 months, which according to the audit team is inadequate and as such the audit
team is unable to ascertain the carrying value of trade receivables.

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