Question

    During the audit of ABC Ltd., the auditor identifies

    that a major debtor who owed ₹2 crore has declared bankruptcy post year-end but before signing of the audit report. What should the auditor do?
    A Ignore the event Correct Answer Incorrect Answer
    B Adjust the financial statements Correct Answer Incorrect Answer
    C Report it in notes only Correct Answer Incorrect Answer
    D Resign from the audit Correct Answer Incorrect Answer
    E Disclose it to shareholders separately Correct Answer Incorrect Answer

    Solution

    This is an “adjusting event” under AS-4 (or Ind AS 10), as the condition existed at the balance sheet date and needs to be reflected in the financials.

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