Question

Over the past 10 years it has become quite common for an accounting firm to withdraw its opinion on a set of previously issued financial statements. Search the Internet to find a recent example of a company that has had to restate its financials and whose public accounting firm has withdrawn its opinion. Write a brief description of the reason for which the entity’s financial statements were restated, and write down the wording that the accounting firm used to indicate that its audit opinion was withdrawn.

Answer 1

According to SA 560 Subsequent Event - When an auditor comes across events which may have material effect on the financial statement, after it has signed audit report , the auditor is required to make appropriate changes in the financial statement and ensure all relevant disclosures are made.

Auditor issues opinon on the basis of evidence obtained and is not expected to carry out through investigation.

Financial Technologies India Limited is one such example where Auditors had withdrawn their audit report and company had to restate its financials.

In the above mentioned case, the auditor of a subsidiary company had given adverse opinon in the financials as the company had defaulted in payments to 13000 investors being an offence under SEBI. This was communicated by the management and auditors of the subsidiary company only after the Consolidated Financial Statement(CFS) were signed. As this has a material impact on CFS.

According to SA - 705 Modification of Opinon - When Auditor conculdes that modification to opinon is required, she may issue an adverse opinon or qualified opinon.

According to SA 706 Emphasis of Matter - When auditor comes across certain events which require special attention of investors. Auditor may use Emphasis of Matter paragraph to address the event.

In this case, Auditor mention in the Emphasis of matter para that subsidiary company was not audited by the holding company's auditor whose net assets are xxx and revenue is xxxx. Since the company has defaulted in payments to be made to investors we reserve our opinon on the financial statement.