CAF-8 · Chapter 14 · Question 10 of 10
When an auditor issues a modified opinion (e.g., a Qualified Opinion) due to a material misstatement relating to specific amounts, what must be included in the 'Basis for Qualified Opinion' paragraph?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A description and quantification of the financial effects of the misstatement, unless impracticable.
Explanation
ISA 705 requires that the basis for modification paragraph must clearly describe the matter giving rise to the modification and quantify its financial effects (e.g., 'Inventory is overstated by Rs. 5 million, and profit is overstated by Rs. 5 million'), so users understand the impact.
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