Your client has two sets of financial statements.One set is in compliance with IFRS,while the other set is in compliance with local tax legislation and will be used only with the tax returns.How do these events affect the independent auditor's report?
A)The auditor would issue an unmodified audit report for both financial statements,with an Emphasis of Matter paragraph that describes to readers the nature of the other set of financial statements.
B)The auditor would issue an unmodified auditor's report for both financial statements,labeling the auditor's report "for IFRS only" and "for tax purposes only."
C)The auditor would issue an unmodified audit report for both financial statements,with an Other Matter paragraph that describes to readers the nature of the other set of financial statements.
D)The auditor would issue a modified audit report,as the client is not allowed to have two different sets of financial statements.

Question

Quizplus · Accepted Answer

The auditor would issue an unmodified audit report for both financial statements, with an Other Matter paragraph that describes to readers the nature of the other set of financial statements. This paragraph would explain that one set of financial statements is used for compliance with IFRS, while the other is used for compliance with local tax legislation and will only be used for tax returns. This type of disclosure is known as an other matter paragraph, and it does not affect the auditor's opinion on the financial statements.

Your Client Has Two Sets of Financial Statements