Page 198 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Wordings of Adverse Conclusion because of a material misstatement
When the practitioner expresses an adverse conclusion on the financial statements, the practitioner shall, unless
otherwise required by law or regulation, use one of the following phrases, as appropriate:
Fair Presentation Framework: “Based on our review, due to the significance of the matter(s) described in the
Basis for Adverse Conclusion paragraph, the financial statements do not give a true and fair view (or do not
present fairly, in all material respects), in accordance with the applicable financial reporting framework,” for
financial statements prepared using a fair presentation framework.
Compliance Framework: “Based on our review, due to the significance of the matter(s) described in the Basis
for Adverse Conclusion paragraph, the financial statements are not prepared, in all material respects, in
accordance with the applicable financial reporting framework,” for financial statements prepared using a
compliance framework.
Basis for conclusion in relation to material misstatement.
In the basis for conclusion paragraph, in relation to material misstatements that give rise to either a qualified
conclusion or an adverse conclusion, the practitioner shall:
Specific amounts: Describe and quantify the financial effects of the misstatement if it relates to specific amounts
in the financial statements (including quantitative disclosures), unless impracticable, in which case the
practitioner shall so state.
Narrative disclosures: Explain how disclosures are misstated if the material misstatement relates to narrative
disclosures.
Omitted Information: Describe the nature of omitted information if the material misstatement relates to the
non-disclosure of information required to be disclosed. Unless prohibited by law or regulation, the practitioner
shall include the omitted disclosures where practicable to do so.
Importance of Narrative Disclosures: Narrative accounting disclosures are an integral part of the corporate
financial reporting package. They provide a view of the company “through the eyes of management” and
represent management's construal of corporate events, being largely discretionary.
Types of conclusions when Inability to obtain sufficient and appropriate evidence:
If the practitioner is unable to form a conclusion on the financial statements due to the inability to obtain
sufficient appropriate evidence, the practitioner shall:
Qualified Conclusion: Express a qualified conclusion if the practitioner concludes that the possible effects on
the financial statements of undetected misstatements, if any, could be material but not pervasive or
Disclaim a Conclusion: Disclaim a conclusion if the practitioner concludes that the possible effects on the
financial statements of undetected misstatements, if any, could be both material and pervasive.
Withdrawal.
The practitioner shall withdraw from the engagement if the following conditions are present:
Limitation on Scope: Due to a limitation on the scope of the review imposed by management after the
practitioner has accepted the engagement, the practitioner is unable to obtain sufficient appropriate evidence to
form a conclusion on the financial statements.
Material and pervasive: The practitioner has determined that the possible effects on the financial statements of
undetected misstatements are material and pervasive and Withdrawal is possible under applicable law or
regulation.
Wordings of Qualified Conclusion Due to inability to obtain Evidence
When the practitioner expresses a qualified conclusion on the financial statements due to inability to obtain
sufficient and appropriate evidence, the practitioner shall, unless otherwise required by law or regulation, use
one of the following phrases, as appropriate:
Fair Presentation Framework: “Based on our review, except for the possible effects of the matter(s) described
in the Basis for Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe that
the financial statements do not give a true and fair view (or do not present fairly, in all material respects) in

www.auditguru.in 10.12