Page 237 - CA Inter Audit PARAM

CA Ravi Taori

QNO-- Treatment to KAM in Case of Disclaimer of Opinion New Course – (N23E)
701.00.50 Bhaskar CNO – SA701.010

M/s ABC & Associates, statutory auditors of Opaque Ltd., are in the process of finalizing the audit report
of the company but in view of their inability to obtain sufficient appropriate audit evidence, they would
like to disclaim their opinion on the financial statements. Explain reporting responsibilities of M/s ABC &
Associates pursuant to SA 700 (Revised). How they will address key audit matters section in accordance
with SA 701 when they are expressing disclaimer of an opinion on the financial statements?
Answer SA 700 requires that if the auditor is unable to obtain sufficient appropriate audit evidence to conclude
that financial statements as a whole are free from material misstatements, the auditor shall modify
opinion in accordance with requirements of SA 705.

SA 705 requires that when the auditor disclaims an opinion on the financial statements due to an inability
to obtain sufficient appropriate audit evidence, the auditor shall:

(i) State that the auditor does not express an opinion on the accompanying financial statements;

(ii) State that, because of the significance of the matters described in the Basis for Disclaimer of
Opinion section, the auditor has not been able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion on the financial statements; and

(iii) Amend the statement required by SA 700 (Revised), which indicates that the financial statements
have been audited, to state that the auditor was engaged to audit the financial statements.

SA 705 requires that unless required by law or regulation, when the auditor disclaims an opinion on the
financial statements, the auditor’s report shall not include a Key Audit Matters section in accordance with
SA 701.

Alternative Solution

When an auditor disclaims an opinion on the financial statements due to an inability to obtain sufficient
appropriate audit evidence, the auditor shall amend the description of the auditor's responsibilities
required by SA 700 (Revised) to include only the following:

(i) A statement that the auditor's responsibility is to conduct an audit of the entity's financial
statements in accordance with Standards on Auditing and to issue an auditor's report;

(ii) A statement that, however, because of the matter(s) described in the Basis for Disclaimer of
Opinion section, the auditor was not able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion on the financial statements; and

(iii) The statement about auditor independence and other ethical responsibilities required by SA 700
(Revised).

Unless required by law or regulation, when the auditor disclaims an opinion on the financial statements,
the auditor's report shall not include a Key Audit Matters section in accordance with SA 701.

QNO Determining Key Audit Matter Old Course--(N19E/N21R/ N20E/N21M/M23E)
701.01 Bhaskar CNO - SA701.040 New Course – (N23E)
As an auditor of listed company, what are the matters that the auditor should keep in mind while
determining Key Audit Matter".
OR

"The auditor shall determine, from the matters communicated with those charged with governance, those
matters that required significant auditor attention in performing the audit. In making this determination,
explain the areas of concern that an auditor should take into account."
Answer ➢ Key audit matters

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