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Question
The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?
The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?
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Solution
The correct option is C Qualified opinion
Qualified Opinion - A qualified opinion must be issued when the auditor knows the financial statements are significant but not that significant that they may be given adverse opinion. The opinion must state the nature of the qualification. If the qualifications are measurable then auditor should quantify it and if not possible then he should state that qualification is not possible.
Always reasons to the qualification should be mentioned by the auditor. The words "subject to" are specified to show quantification.
Qualified Opinion - A qualified opinion must be issued when the auditor knows the financial statements are significant but not that significant that they may be given adverse opinion. The opinion must state the nature of the qualification. If the qualifications are measurable then auditor should quantify it and if not possible then he should state that qualification is not possible.
Always reasons to the qualification should be mentioned by the auditor. The words "subject to" are specified to show quantification.
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