Revision question on audit reporting NBAA may 2019

You as the audit partner of MM Associates, an auditing firm, have been reviewing audit work for one of your clients. During the process, you came across the following proposed audit opinion: Adverse Opinion on the Financial Statements: “As more fully explained in note 10, the financial statements include an amount of 96 billion representing the cost of property, plant and equipment. No provision for impairment has been made against these assets and no valuation appraisal has been undertaken by the directors.



Published information concerning comparable properties indicates very significant reductions in valuations have been experienced. In our opinion, these circumstances indicate that provision should be made for impairment in values as required by International Accounting Standard 36: Impairment of Assets. Whilst the extent of impairment is subject to factors whose outcome cannot be determined with certainty, based on information relating to comparable properties, the effect of its omission is likely to materially overstate the carrying value of the Group’s assets at 31st December 2018; and understate its loss for the year then ended. In view of the effect of the failure to provide for the impairment referred to above, in our opinion the financial statements do not give a true and fair view, in accordance with ….”

REQUIRED:

Critically appraise the appropriateness of this audit opinion

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