CA Inter P5 · Chapter 8 · Question 8 of 13
After the year-end, a major earthquake damaged the main plant of Shrey Cement Ltd. Management has appropriately disclosed this in the financial statements. The auditor considers the matter fundamental to users' understanding. Under SA 706, the auditor may:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Include an Emphasis of Matter paragraph referring to the disclosure, without modifying the opinion
Explanation
SA 706 permits an Emphasis of Matter paragraph to draw attention to a matter appropriately presented or disclosed that is fundamental to users' understanding, such as a major catastrophe. The paragraph states that the opinion is not modified in respect of the matter. A qualified opinion is inappropriate since there is no misstatement or limitation.
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