Question No 19:
At its financial year end HX has an outstanding legal action against it by a large multinational entity. It is highly probable that the legal action will be successful and HX will have to pay substantial damages. HX has refused to provide for these damages.
In the opinion of the auditor, failure to make this provision means that the financial statements are seriously misleading.
What type of audit report will be issued in this situation?
A. A modified report with an adverse opinion
B. An unmodified report with an emphasis of matter paragraph
C. A modified report with a disclaimer of opinion
D. A modified report with a qualified opinion