CA Inter P5 · Chapter 8 · Question 5 of 13
The auditor of Neha Garments Ltd. finds that inventory is overvalued by an amount that is material but confined to inventory and not pervasive. Management refuses to correct it. The auditor should express:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A qualified opinion
Explanation
Under SA 705, a qualified opinion is expressed when misstatements are material but not pervasive. An adverse opinion is used when misstatements are both material and pervasive. A disclaimer relates to an inability to obtain sufficient appropriate evidence where possible effects could be material and pervasive.
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