Q42 ch7 CA IPCC PM

6 answers

Ravi Staff October 6, 2017

i think you didn’t understand second paragraph.
there can be situation where auditor is able to get all information he wants and management is also doing full co-operations but circumstances are such that he is not able to conclude financial impact and accounting for example
 
net worth has eroded, company’s capacity utilisation is low and cost of production is high as compared to market
but company may get government support, change is government policy to boost local manufactures can help
company’s financial position is getting worse but new investors may support
so there are multiple uncertainties, we are unable to conclude about going concern, we are unable to conclude whether to write off asset balances we are unable to conclude whether to make provision 
hence we give disclaimer because of multiple uncertainties, tough we have sufficient and appropriate evidence, it is unique case found rarely 

#1
Audit Staff October 6, 2017

Vagueness is still there… So how it is possible that will cost of production is high and capacity utilisation is low and networth has been eroded how is it possible I am unable to understand this is it because of frauds which are incurring in the organisation or the entity of which we are conducting audit what is it I am unable to understand please elaborate the concept. 

#2
Audit Staff October 6, 2017

If you think it practically if the cost of production is high as compared to market the company will try to get good technology better technology and replace the present once after having good financial analysis using capital budgeting etc. this is impractical I am unable to understand it

#3
Audit Staff October 6, 2017

You always say that while studying audit be practical

#4
Ravi Staff October 7, 2017

this is practical example of indosolar limited
they are facing loads of financial / technological / operational problems and there is lot of uncertainty whether they will be able to resolve these matters and what will be outcome on assets and liabilities, difficult to measure impact on profit loss 
as there are multiple  uncertainties KPMG gave disclaimer  

#5
Ravi Staff October 7, 2017

i didnt share complete report as it may confuse you 

#6

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