ProForce Inc. is facing a large lawsuit from its employees. The contingency is significant and may lead to a going concern issue if ProForce is found guilty. ProForce took the adequate measures, as prescribed by IFRS (International Financial Reporting Standards), to account, disclose, and present the contingency in the financial statements. The auditor should
A) add an emphasis of matter paragraph after the opinion paragraph.
B) issue a standard unqualified report.
C) issue a qualified report.
D) deny an audit opinion.

Question

Quizplus · Accepted Answer

Adding an emphasis of matter paragraph after the opinion paragraph would draw attention to the lawsuit and its potential impact on ProForce's financial position. This would provide users of the financial statements with additional information that could impact their decision-making. An unqualified report or a qualified report may not provide sufficient information to users regarding the contingency, and denying an audit opinion would be extreme if ProForce has appropriately accounted for and disclosed the contingency.