Richards Ltd has reported losses two years in a row and has a debt to total assets ratio of 0.90.In addition, a $5 million debenture is maturing next year and the company has not set aside any funds to repay the debt.The parent entity of Richards Ltd has decided to repay the debenture when it matures and provide sufficient funding to cover any additional losses that Richards Ltd might incur.Richards Ltd has not disclosed these arrangements in its financial report and the auditor is adamant that it should be brought to the shareholders' attention.What type of opinion should the auditor express on the financial report of Richards Ltd?
A)Disclaimer of opinion.
B)Unmodified opinion with an Emphasis of Matter.
C)Unmodified opinion with a Material Uncertainty Related to Going Concern paragraph.
D)Qualified opinion or adverse opinion.

Question

Quizplus · Accepted Answer

The auditor should express a qualified opinion or adverse opinion because the company has not disclosed the arrangements with its parent entity, which could have a material effect on the financial statements.

Richards Ltd Has Reported Losses Two Years in a Row