Question

The client has a subsidiary in the USA and another in Canada, which this year together accounted for 8% of the group’s revenue, profit and net assets. Neither subsidiary is audited although both use external professional accountant to prepare the financial statement. The client’s management was unwilling to ask local accountants to perform a full audit.

Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.

Answer 1

Facts of the Case: The Auditee having two subsidiary in USA and Canada, both subsidiary Financial Statement is prepared by external accountant, the Auditee restrict over the appointment of local audit firm to conduct audit.

On complete analysis of the situation, it is irrespective of the facts of turnover contribution in consolidation financial statement, even if any misstatement remains in Consolidated financial statement due to unaudited subsidiary financial statements, it will un-validate the audit opinion expressed on the consolidated financial statement.

Due to unable to obtain sufficient and appropriate audit evidence to express opinion on the financial statement of the subsidiaries, lead to provide “ Disclaimer of Opinion” over the Consolidated financial Statements.

The Disclaimer of Opinion is pervasive in nature in Consolidated financial statement is pervasive so it is unable to quantify the opinion. Hence Disclaimer of opinion is issued in respect of Consolidated financial Statement.