Page 191 - CA Final PARAM Digital Book.

QNO Comparatives (Previous Year Misstatements) Old Course – (M09E, M11R, M12R, N12M, N14R, N14E,
126.000 TITANIUM CNO—SA710.080 PM17, M18M, M18E, N18E, N20M, M23M)
The audit report of P Ltd. for the year 2016-17 contained a qualification regarding non-provision of
doubtful debts. As the statutory auditor of the company for the year 2017-18, decide how would you
report, if :
(i) The company does not make provision for doubtful debts in 2017-18?
(ii) The company makes adequate provision for doubtful debts in 2017-18?
OR
For the year ended 31st March, 2016, the audit report of Avinash Ltd. contained a qualification regarding
non-provision for diminution in the value of investments to the extent of ? 50 lacs. As an Auditor of the
Company for the year 2016-17, how would you report, if :
(i) The Company does not makes provision for diminution in the value of investments in the year 2016-
2017.
(ii) The Company makes adequate provision for diminution in the year 2016-2017.
OR
It was observed from the modified audit report of the financial statements of AS Ltd. for the year ended
31st March 2017 that depreciation of Rs 2.50 crore for the year 2016-2017 had been charged off to the
Statement of Profit and Loss instead of including it in “carrying value of asset under construction". State
in relation to the audit for the year ended 31st March 2018, whether such modification in the previous
year's audit report would have any audit implication for the current year and if yes, how would you deal
with it in your audit report?
Answer Requirement of SA 710
Auditor’s responsibility in cases where audit If material misstatement exists in
the P.Y FST & a Q/Disclaimer/A opinion
report for an earlier year is qualified is given in was given by auditor and the matter
SA 710 “Comparative Information – which gave rise to the modification is
Corresponding Figures and Comparative
Financial Statements”.
➢ Matter Resolved Unresolved Resolved
in C.Y
As per SA 710, when the auditor’s report in C.Y
on the prior period, as previously issued, Auditor shall
included a qualified opinion, a also modify the No need to refer to
disclaimer of opinion, or an adverse audit report on P.Y modification
opinion and the matter which gave rise C.Y FST
to the modified opinion is resolved and
A
properly accounted for or disclosed in If such P.Y s If such P.Y s B
the financial statements in accordance Modification has Modification
with the applicable financial reporting material effects on C.Y does not
framework, the auditor’s opinion on the figures material affects
current period need not refer to the the C.Y
previous modification.
Refer current period s Explain in opinion para
➢ Matter Not Resolved figures and the that the audit opinion
SA 710 further states that if the auditor’s corresponding figures has been modified
report on the prior period, as previously in opinion Para because of the effects
issued, included a qualified opinion and of the unresolved
the matter which gave rise to the matter on
modification is unresolved, the auditor comparability
Of C.Y figures & P.Y
shall modify the auditor’s opinion on the figures
current period’s financial statements. In
the Basis for Modification paragraph in the auditor’s report, the auditor shall either:
• Material effect on Current year
Refer to both the current period’s figures and the corresponding figures in the description
of the matter giving rise to the modification when the effects or possible effects of the
matter on the current period’s figures are material; or
• No-Material effect on Current year

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