AUDIT AND ASSURANCE

Suggested Answers
Nov-Dec 2021

Answer to the question no: 1(a)

According to International Standard, Auditor shall not take audit engagement or be part of any audit engagement if
there is any ethical issue. One the ethical issue is continuing engagement with threat to independence. Auditors’
independence impairs when auditor has interest with the audit client. In the given situation, I as audit team member
has financial interest on Diamond Agro Limited as I have purchased its share. Therefore, my involvement with audit
of Diamond Agro Limited creates threat to my independence and causes ethical issue. To overcome this situation, I
have to either dispose my investment in Diamond Agro Limited or Remove myself from the audit team. Nevertheless,
I have to inform audit partner regarding my issue. If after informing the partner it appears that removing myself is not
an option, I will have to dispose the shares even if it is making loss.

Answer to the question no: 1(b)

Before responding to the management of Angelic, my audit partner should consider the potential threat to
independence from Angelic Hotel Limited. Because the firm has close business and financial relationship with
Angelic, it impairs our and firm’s independence. Furthermore, as we frequently rent rooms, there must but some credit
transactions. According to the Company’s Act 1994, a person is not eligible to audit a company if it has obligation to
the company for more than 1,000 Taka. Partner of the firm should reject the proposed auditor appointment on the
ground that it creates threat to independence. Furthermore, firm is ineligible to become auditor as per the regulation.

Answer to the question no: 1(c)

Ideally providing Audit service to PPL and Consulting Service to NRL would not create any ethical issue and both
services would be permissible. However, the moment PPL acquired NRL, it created and an ethical issue for our firm.
Because our firm provides consulting services to NRL for implementing SAP system and developing IT controls, it
will help NRL in developing system that support bookkeeping services and preparation of financial statements. So,
when PPL will use NRL financial statement for Consolidation, PPL’s consolidate financial statements will include a
portion for which my firm has provided non-audit service. So, auditing Consolidated financial statement will lead to
self-review threat. Even in the stand-alone financial statements, valuation of investment in NRL may depend on the
work our firm done during SAP implementation at NRL. Therefore, my firm should resign as auditor of PPL.

Answer to the question no: 1(d)

Ahmed & Mushtaq took an Uber ride to transport their client working file but lost it for some time. Although they
recovered the working files but for few hours these audit documents were not within their protection. These documents
contain confidential information about the client. Leaking confidential information would harm the client. So, when
the files were not within their control, there were chances that this confidential information has been breached. As
professional Ahmed & Mushtaq should have been more careful. Loosing audit files and creating opportunity for data
breach shows lack of professional behaviour from Ahmed & Mushtaq. They should let the partner know about the
incident and allow him how to deal with the situation and inform the client about potential data breach.

Answer to the question no: 1(e)

ICAB has been focusing on digitalizing audit practice in Bangladesh. As part of the process, ICAB has arranged to
provide license of international standard audit software at discounted price to the audit practitioners in Bangladesh.
Followings are the benefit of using audit software:
1. Audit evidence can be documented easily.
2. Easily summarize risks and procedures to address them.
3. Indicate and record manager and partner review date and time.
4. Visually list down the audit tasks according to audit steps.
5. Decreases chances of missing audit procedures.
6. Easily accumulate audit findings which helps in concluding audit.
7. Assist in creating communication with client management.
8. Assist practitioner in determining audit opinion.
9. On-process review by partners before finishing audit.

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 10. Files can be archived easily after issuing audit opinion and retrieve the files when necessary.

Answer to the question no: 1(f)

Key professional and ethical issues are as follows:

There exists a conflict between auditor's responsibility to maintain confidentiality and their statutory duty to opine
whether the financial statements give a true a fair view. Trade receivables from Q Fashion is material. Hence the
financial statements are materially misstated as trade receivables from Q Fashion have been treated as unimpaired by
GTex Limited. In this scenario issuing an unmodified audit opinion may be misleading as the financial statements are
known not to present a true and fair view of the financial position of GTex as at 30 June 2021. Audit firm risk breaching
statutory duty as per Companies Act, 1994 and the Financial Reporting Act, 2015 in case a clean opinion is issued.
Informing management of GTex that trade receivables from Q Fashion are impaired due to financial difficulties faced
by the entity would tantamount to breach of confidentiality under the Code of Ethics. Hence confidential information
should not be disclosed outside the firm.
The audit senior of GTex and the manager of Q Fashion should immediately inform respective audit engagement
partners that confidential information about Q Fashion has been inadvertently leaked out to the audit engagement team
of GTex. This would enable the firm to take necessary steps to protect confidential information.
Usual audit procedures recommended by ISA should be carried out for trade receivables by the audit engagement team
of GTex. Enquires and external confirmation procedures should be carried out to corroborate audit evidence regarding
trade receivables.

Answer to the question no: 2(a)

In order to establish whether the preconditions for an audit are present, the auditor shall:
- Determine whether the financial reporting framework to be applied in the preparation of the financial
statements is acceptable;
- Obtain the agreement of management that it acknowledges and understands its responsibilities:
(i) For the preparation of the financial statements in accordance with the applicable financial
reporting framework, including where relevant their fair presentation;
(ii) For such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement whether due to fraud and error; and
(iii) To provide the auditor with:
a. Access to all information of which management is aware that is relevant to the preparation of
the financial statements such as records, documentations and other matters;
b. Additional information that the auditor may request from management for the purpose of the
audit; and
c. Unrestricted access to persons within the entity from whom the auditor determines it
necessary to obtain audit evidence.
Answer to the question no: 2(b)
‘Cold review’ is designed to be a continuing part of the quality control process and take place after the assurance
assignment has been completed. It is usually conducted by the partner other than the engagement partner or a
specialized team constituted to conduct such review or a suitably qualified external consultant(s)/experts.

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Answer to the question no: 2(c)

To: Engagement Partner

From: Engagement Manager
Subject: Audit procedures on going concern of Teams Limited

Dear Sir

As per your instruction please find below the going concern indicators and related audit procedures with respect to
Teams Limited.

Going concern indicators:

The following matters may indicate material uncertainty regarding going concern exits:
1. The Company reported negative total equity of Tk90 million and Tk85 million for the years 2020 and 2019
respectively;
2. The Company has been reporting total loss before tax since the year 2018;
3. The current liabilities of the company exceeded its current assets Tk20 million as at year end 2020 and Tk9
million as at year end 2019.
4. The company does not have any plan to launch new products or services.

The fact that an amount of Tk121 million additional fund has been injected into the company during the year indicate
management's intention to keep the company afloat for the foreseeable future. In case the Company is able to secure
additional financial support from the parent company, one or more of the above negative indicators may be
ameliorated. If as at the reporting date, the company is able to secure additional financing as at the financial statements
authorisation date, it may be concluded that the company is a going concern for the foreseeable future.

Proposed audit procedures:

The following audit procedures may be performed with respect to going concern matter:

1. Obtain management's assessment of the going concern situation of the company.

2. Assess whether any additional facts or information have become available since the date of the management's
assessment.
3. If the entity has prepared cash flow forecasts and their consideration is critical in the management's plans in respect
of going concern, evaluate the reliability of the underlying data used in the forecasts and determine whether the
assumptions underlying the forecast can be adequately supported by evidence. The analysis of the cash flow
forecasts can also be extended by comparing forecasts for recent prior periods with historic results and the forecasts
for the current period with actual results to date.
4. Obtain support letter from the parent company with respect to going concern.
5. Execute audit procedures regarding subsequent events to identify those that either mitigate or otherwise affect the
entity's ability to continue as a going concern.
6. Obtain written representation from management regarding the company's ability to continue as a going concern.

Answer to the question no: 2(d)

MIC has received appointment letter from Super Fresh Limited (SFL). As per ISA, auditor need to agree on the terms
of audit before they take the appointment. An engagement letter indicates the roles and responsibilities of management
and the auditor, fees for the engagement and other terms and conditions. If these terms and conditions are not agreed,
auditor will not be able to accept the engagement. As these terms and conditions are not present in the auditors’
appointment letter, Only the appointment letter can not serve as purpose. Furthermore, the appointment letter is not
signed by both parties. Hence a separate engagement letter is required to authenticate that both auditor and management
has agreed on the terms on condition. So, given this situation, MIC should not accept SSF audit engagement unless
the engagement letters are signed or any other documents that management has agreed with the terms and conditions
mentioned in the engagement letter.

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Answer to the question no: 3(a) (i)
Potential audit risks for the ascertainment of stock quantities and steps to be taken to mitigate those risks:
Sl. No. Potential Risks
1. Different grades of coal
exist. They need to be
identified and sorted for
accurate counting.
2. Goods in transit at year end
and held in storage at a
nearby port.
3. No continuous stock records
to provide support for
physical quantities.
4. Accuracy of stock
movements during the year
is largely dependent upon
correct working of
weighbridge.
5. Stock belonging to third
parties is held at client’s
premises and may
incorrectly be included in
yearend count.
Steps taken to mitigate risks
• Review client’s stock taking instructions and its
effectiveness.
• Consider problems experienced in previous years.
• Identify the cause and probable solutions to those
problems experienced last year in consultation with
the management beforehand.
• At start of count, review the site with senior official
on overall arrangement includes stacking grade wise
coal.
• Physically present to observe the segregation and
counting procedures of surveyor.
• Review local suppliers’ goods reconciliation with
especial attention of movements at the end of the
year.
• Obtain a list of goods imported and cleared from
customs during the year checked with supporting
documents.
• Review the reconciliation of goods transferred from
storage at a nearby port to company’s premises
during the year.
• Enquire about the level of stock on third party’s
premises or at ports and arrange for stockholding
certificate requests to be sent.
• If required, random checking of stock at third party
premises may be done.
• Reconcile the overall flow of coal inward and
outward considering the opening balance (last year
physical closing balance) and calculate book closing
balance.
• Adjust wastage percentage as per business norm or
industry average in order to calculate adjusted book
closing balance.
• Compare this memorandum stock balance with the
physical stock balance to observe the difference.
• Carry out test calculations random basis and agree to
stock count sheets.
• Review man power deployment, their process of
counting and check the accuracy of weighbridge
during stock counting.
• Observe overall efficiency and reasonableness of
count.
• Establish how often weighbridge is calibrated.
• Evaluate the functioning capacity of weighbridge
considering origin, elapsed useful lives, built in
capacity.
• Also discuss with its operator regarding its
effectiveness in measuring coal.
• Obtain customers’ confirmation at year end to
establish any third-party stock holding for washing
and sorting.
• Evaluate the company’s procedure to maintain and
treat third-party stock.
• Carry out sales cut-off tests.
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 6. Specialist surveyor • Consider surveyor’s qualification and experience.
employed to count stock. • Consider prior year’s problems.
This could give rise to risk • Identify whether the same surveyor worked for the
if – prior year.
- Surveyor not • Review the selection process and independence of
independent and/or surveyor.
- Not competent • Review the instructions issued to surveyor by the
which results in company.
inaccurate
assessment of
volume and
calculations, mix up
of various grades of
coal.
7. Business to continue up to • Review client’s stock taking instructions for dealing
lunch time of the day of with goods in and out during the Saturday. New
counting, therefore, double deliveries should be kept to one side of yard and
counting could occur. counted last. Proposed dispatches should be sorted
the night before and put aside. Any remaining stock
not dispatched to be counted at the end of the
Saturday.
• Stock once counted should be allocated a stock card
showing the counting performed on the lot.
• Ensure staff attending the count have a detailed note
of last goods in and out. This information can then be
used in a stock movement reconciliation to support
physical count total.

Answer to the question no. 3(a) (ii)

As per paragraph 8 of ISA 500, Audit Evidence, the auditor should evaluate the expert’s evidence as to the reliability
to use the same for drawing auditor’s opinion on the assertion. In that process the auditor should:

• Evaluate the competence, capabilities and objectivity of that expert;

• Obtain and understanding of the work of that expert; and
• Evaluate the appropriateness of that expert’s work as audit evidence for the relevant assertion.
In view of the above, the auditor needs to present in the stock count to observe the process of surveyor’s work in order
to assess the reliability for evidence.

Answer to the question no: 3(b)

Requirement -i:
Following assertions has been affected

Accounts Line item Assertion Affected Risks

Existence Receivable might not exist.

Intercompany Valuation Receivable might not be valued properly.

Receivables
Rights & Obligation Receivable might not be collected.

Presentation & Disclosure Receivable might not be disclosed properly.

Valuation PPE is not valued properly.

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 Property, Plant & Cost, accumulated depreciation and Written Value
Presentation & Disclosure
Equipment might not be disclosed properly.

Finished Goods might exist but may not be

Existence
recognized as finished goods.
Inventories
Valuation Inventory may not be valued properly.

Requirement -ii:
Following assertions has been affected

For Intercompany receivables:

• Obtain confirmation from KPL about outstanding receivables.
• Obtain explanation why the receivables from KPL were not collected.
• Check valuation of the receivables from KPL considering expected credit loss under IFRS 9.
• Confirm whether RGL has rights to collect the receivables.
• Verify whether appropriate disclosure has been made in the financial statements.

For property, plant & equipment:

• Check whether cost, depreciation and accumulate deprecation are calculated properly.
• Check the reversal entry of revaluation of PPE.
• Confirm whether reversal has been complied with relevant financial reporting standard.
• Check whether appropriate disclosure has been made in the financial statements.

For inventories:
• Perform physical stock count to verify raw materials, WIP and Finished Goods.
• Confirm that no finished goods are recorded as WIP.
• Confirm that inventory has been valued at lower of cost and net realizable value.

Requirement -iii:
Following audit evidence need to be collected from performed audit procedures:
• Receivable Confirmation from KPL.
• List of receivables disclosed in the financial statements.
• Inventory valuation calculation.
• Inventory list for stock count.
• Explanation for reversing fair value of PPE.
• Board approval for reversal of fair value of PPE.
• Journal Entry passed for reversal of fair value of PPE.

Answer to the question no: 4 (a)

Identification and assessment of fraud risks:

Diagnostics Department:
• Head of department is solely responsible for addition and disposal of diagnostic equipment.
As the Head of depart is solely responsible, there might be fraudulent purchase and disposal of medical
equipment. HOD may make liaison with supplier for unnecessary purchase or purchase at a higher price.
Furthermore, HOD may dispose medical equipment which is functional or require little maintenance.
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 • Cash receipt at the payment counter.
Patients are given option for cash payment. However, cash received from the patients are kept at the payment
counter and deposited to accounts department at the day end. During this time, there is opportunity for theft
of cash. Furthermore, if cash received is not separately tracked in the billing system, there is opportunity for
misappropriation of fund.

• Doctors’ commission paid in cash.

Doctors’ commission are accumulated throughout the month and paid in the cash. Doctors might not be aware
of the total balance of their commission. So, there is chance that lower amount commission is paid to the
doctors as the payment is made in cash and received document might be forged. Furthermore, the person
delivering cash to the doctors might also misappropriate the cash during delivery.

Consultation Department:
• Consultation fee is taken in cash
Consultation fees are collected in cash by the administrative assistant. As the cash receipt is handwritten, there
is a chance that administrative assistant collects higher amount of cash from the patient and make fraudulent
receipt. Furthermore, if the number of patients is not recorded properly, administrative assistant can take away
the entire amount of consultation fee. Therefore, revenue of PDCL may be missed out.

• Doctors’ shares are taken in cash at the day end

Doctors takes their shares of consultation fees at the end of their allocated slot. As these payments are not
reviewed or authorized by anyone from PDCL, there is a chance that doctors take higher percentage of the
fees compared to the 60%. Also, doctors might not report the consultation fee at all. Therefore, revenue of
PDCL may be missed out.

Administrative Department:
• Misappropriation of company Asset
In absence of complete asset register, there were some misappropriations of company’s office equipment. It
might be possible that there is frequent stealing of the equipment, but PDCL cannot trace those assets due to
lack of complete asset register.

Answer to the question no: 4 (b)

Identification and assessment of significant risks other than fraud risks:

• Property, Plant, and Equipment is misstated:

PDCL does not have complete asset register. As a result, it is unable to confirm the existence and valuation of
its assets. Furthermore, there were case of stealing. Therefore, property, plants, and equipment are not fairly
stated.

• Incorrect revenue recognition:

PDCL pays 20%-25% of commission against the diagnostic fees. Hence these amounts should be reduced
from PDCL revenue. There is a chance that PDCL recognised the commission amount as its revenue.
Furthermore, it is not fully monitors it share of consultation fee. Hence, there is very high chance that revenue
is misstated.

• Incorrect cash balance:

There are frequent cash dealings within PDCL like fees receipt in cash, commission and doctors’ consultation
charge are paid in cash. Because of these there is high chance that cash amount has been misstated.

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Answer to the question no: 4 (c)

Audit procedures for identified risks:

• Obtain and review documents of asset purchase.

• Obtain and review of asset disposal documents.
• Perform substantive test on Asset addition and disposal.
• Review the explanation for asset disposal.
• Check the doctors’ commission determination process.
• Check documentations of doctors’ commission.
• Check the payment documents of commission payment.
• Check for authenticity of cash receipt memo from doctors.
• Check reconciliation of cash received at diagnostic division with the amount deposited to cash department.
• Observe consultation and fees collection process.
• Confirm whether there is any patient register and confirm the number of patients took consultation with the
register.
• Check whether any receipt documents are kept when doctors take their share of consultation fees.
• Perform a physical verification of assets.
• Check the depreciation calculation share by the management and confirm all the assets in the asset register
has been recorded.
• Confirm that new assets have been updated in the asset register.
• Perform surprise cash count at Diagnostics payment counter, consultation chambers and at the accounts
department.

Answer to the question no: 4 (d)

Suggested controls to address identified risks:

• Head of diagnostics division should not take sole decision. Rather he should raise request for asset addition
and disposal. There should be some one to verify the request and approve it.
• There should be an automated billing system for both diagnostic and consultation division.
• Determination of doctors’ commission should be automated.
• Doctors’ share of fees shall be determined automatically though the billing system.
• Cash received should be recorded in the billing system with identification of the receiver.
• Amount of cash received should be reconciled with physical cash amount.
• Proper asset registered should be maintained.
• There should be regular physical verification of assets to confirm asset register is updated.
• Doctors’ commission and share of consultation fee should be paid though banking channel.
• PDCL should maintain a patient register for consultation division.

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Answer to the question no: 5 (a)

Independent Auditor's Report (Extract)

To the shareholders of EPL Limited

Key Audit Matter

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.

Impairment testing of goodwill

The key audit matter:

EPI- Limited has recognized goodwill in the amount of Tk 400 million (2019: Tk 400 million). Goodwill has been
allocated to the Raw Material Processing cash generating unit (CGU) and the Export Market CGI-J. The annual
impairment testing of goodwill is considered to be a key audit matter due to the complexity of the accounting
requirements and the significant judgement required in determining the assumptions to be used to estimate the
recoverable amount. The recoverable amount of the CGUs, which is based on the higher of the value in use or fair
value less costs of disposal, has been derived from discounted forecast cash flow models. These models use several
key assumptions, including estimates of future sales volumes and prices, operating costs, terminal value growth rates
and the weighted-average cost of capital (discount rate).

See Note 20 to the consolidated financial statements for relevant disclosures regarding goodwill.

How the matter was addressed in our audit:

Our audit procedures in this area included, among others:

• involving our own valuation specialist to assist in evaluating the appropriateness of the discount rates applied,
which included comparing the weighted-average cost of capital with sector averages for the relevant markets
in which the CGUs operate;
• evaluating the appropriateness of the assumptions applied to key inputs such as sales volumes and prices,
operating costs, inflation and long-term growth rates, which included comparing these inputs with externally
derived data as well as our own assessments based on our knowledge of the client and the industry;
• performing our own sensitivity analysis, which included assessing the effect of reasonably possible reductions
in growth rates and forecast cash flows to evaluate the impact on the currently estimated headroom for the
European Paper manufacturing and distribution CGU; and
• evaluating the adequacy of the financial statement disclosures, including disclosures of key assumptions,
judgements and sensitivities.

Answer to the question no: 5 (b)

Requirement -i:
My Comment on the matters are following:
Revenue:
Difference in revenue shown in the financial statements and the VAT return may require some reconciliation. Team
need to obtain the reconciliation and check the reconciling items for accuracy. If no reconciliation is found, we should
consider that EFL has reported less revenue to evade VAT and included the VAT count within reported revenue. In
this case we should suggest an adjustment for BDT 652,174 by decreasing revenue and increasing VAT liability. Note:
(23,000,000 – 18,000,000 = 5,000,000 x 0.15 ÷ 1.15 = 652,174)

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Supplier Payment:
As per the tax law supplier payment over BDT 50,000 in cash will not be allowed as deductible expense. However,
the here excess cash payment is BDT 25,000 only. This amount is very trivial and any penalty arising from this amount
will be immaterial. However, we can communicate the matter through Management Letter.

Foreign Currency Valuation:

Foreign currency valuation is required for monetary items at the year end. As payables are monetary item, it requires
valuation at the year end. It appears management has not made the valuation. Hence, we should suggest adjustment by
recognizing exchange loss and increasing payable for an amount of 575,000.

Going Concern Assessment:

As per both Auditing standards and Financial Reporting standards, Management is required to perform going concern
assessment when there are certain conditions present that raises threat to going concern. If there is no condition present,
management might not perform going concern. But they must conclude that those conditions are not present. Audit
team members may assess whether those conditions are present. If those conditions are present, we may notify the
management that those conditions are present but might reflect in our audit report. However, if there are no conditions
present, we can issue a point management letter suggesting management to perform regular assessment for threat to
going concern.

Bank Confirmation:
If we don’t receive bank confirmation, we should re-send the confirmation request to the bank. We can directly go to
the bank with management authorization to obtain the confirmation. However, if the bank still refuses to issue
confirmation, then we should consider it as limitation of scope and communicate with management.

Requirement -ii:

Memo on the matters identified during audit

From : Audit Partner
To : Management, EFL

Dear Concern,
We have identified several matters during our audit which needs to be brought under your attention.

1. Suggested Adjustments:
a. Revenue:
We have noticed that there is a difference of BDT 5,000,000 between Revenue reported and the VAT
return submitted. In absence of any reconciliation, we believe no VAT was paid on the excess amount
and includes VAT collected from management. Hence we are suggesting following adjustment entry:
Revenue Dr. 652,174
VAT Payable Cr. 652,174

b. Foreign Currency Valuation:

We have noticed that foreign currency denominated trade payable has not been revalued at the year
end and as a result it was understated. Hence, we are suggesting following entry:

Exchange Loss (unrealized) Dr. 575,000

Trade Payable Cr. 575,000

These entries are individually immaterial but become material when aggregated.

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 2. Issues for Management Letter:
a. Cash Payment:
We have noticed that supplier payment has been made in cash for 75,000. This exceeds the cash limit
suggested by management. Although the amount is small, but it might become huge if not controlled
now. In order to avoid excess tax payment, management should make payment though banking
channel.

b. Going concern Assessment:

As per auditing standard and the financial reporting standard, management should perform assessment
whether there is any condition exists that could threat going concern assumption. Even if the company
is healthy position, it should always perform the assessment. Our internal assessment shows company
is going concern and no conditions are present that threats are present. If there were, it would have
been and reportable issue.

3. Issues impacting audit opinion:

a. Bank Confirmation:
We have sent confirmation requests to banks. However, we have not received any confirmation yet.
Hence, we are unable to confirm the bank balance and any condition associated with the balance. As
a result, it has become limitation of scope.

Requesting your comment on the above matters before we can issue our draft opinion.

Sincerely

Audit Partner.

Requirement -iii:

For adjustment entries:

Adjustment entries are not individually material as they are below the overall materiality, but they are material when
aggregated. If those adjustments remain uncorrected, they it will become material. In that case we will express and
qualified opinion.

For bank Confirmations:

If we don’t receive bank confirmations, it becomes a limitation on scope, and we should express an qualified opinion
in this matter.

Answer to the question no: 5 (c)

Requirement -i:

ECL:
Conclusion drawn by the team member is not correct. ECL recognizes entire license fees as revenue in the period when
it originates. However, this should not be the case. As the license are granted for particular time period, and the ECL
has the obligation to provide access to the software throughout the licensed period, ECL can not recognize the revenue
at the time of issuing license. Rather, it should recognize revenue through out the licensing period. For example, if a
license is for 15 months. It should recognize revenue over 15 months.
As ECL has not recognized revenue over time, conclusion drawn by the team is not correct. They should notify
management about the error and suggest them to correct it. Once management correct the error, it should be checked
by the audit team.

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SBL:
Audit team has verified the loan balance, interest expense and current/non-current classification of the loan amount.
However, they have not performed any procedures about disclosing material information like fixed assets kept as
collateral for the loan. In the financial statement, management should disclose the fact the non-current assets have
been kept collateral for the bank loan. So that users could be aware that in case loans are not paid back, company may
have to give up their fixed asset and that could lead to going concern threat for the company. So, team’s conclusion is
not correct. They need to further work for adding disclosure in the notes to the financial statement.

Requirement -ii:

ECL:
If ECL do not correct revenue recognition over time, it would misstate the revenue reported in the financial statements.
In that case a qualified opinion will be issued. However, if the correction is made, unqualified opinion will be issued.

SBL:
If SBL team does not disclose the collateral issue in the notes to the financial statements, we should express a qualified
opinion as material information is not disclosed. Being the matter very significant, even if the information is disclosed,
we can add an emphasis of matter line in the audit report to draw users’ attention.

---The End---

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