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Answer In the present case, XYZ Ltd. is unable to re- negotiate or obtain the replacement financing for its long term
and short-term funding requirements. This situation indicates the existence of a material uncertainty that
may cast significant doubt on the Company’s ability to continue as a going concern and therefore, XYZ Ltd.
may be unable to realize its assets and discharge its liabilities in the normal course of business. Further, the
financial statements of XYZ Ltd. do not disclose this fact adequately.
Thus, the financial statements of XYZ Ltd. are materially misstated due to the inadequate disclosure of the
material uncertainty. CA Sudhir will express a qualified opinion as the effects on the financial statements of
this inadequate disclosure are material but not pervasive to the financial statements.
The relevant extract of the Qualified Opinion Paragraph and Basis for Qualified Opinion paragraph is as
under:
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except
for the incomplete disclosure of the information referred to in the Basis for Qualified Opinion section
of our report, the aforesaid standalone financial statements give the information required by the Act
in the manner so required and give a true and fair view in conformity with the accounting principles
generally accepted in India, of the state of affairs of XYZ Ltd. as at March 31, 2023, and profit/loss, for
the year ended on that date.
Basis for Qualified Opinion
As discussed in Note 6, the Company’s financing arrangements are about to expire and the Company
has been unable to conclude renegotiations or obtain replacement financing. 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 statements do not adequately disclose this matter.
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