integrity of management, then the auditor will consider options, as withdrawing from

engagement or disclaiming the opinion

b)
- The services may be provided either as an Agreed Upon Procedures Engagement or as
an Assurance Engagement other than Audit of Historical Financial Information.
- In case of Agreed Upon Procedures, the report will contain the procedures performed
and the results of such procedures in the form of factual findings.
- In case of assurance engagement, the report may take two different forms i.e. a
reasonable assurance report or a limited assurance report.
 In the limited assurance report the auditor will provide negative
assurance on the compliance of entity with the framework.
 In a reasonable assurance report the auditor will provide a positive
assurance on the compliance of the entity with the framework.
A.6
a)
- Obtain evidence with respect to the financial support from the parent company, such as support
letter/ agreement, etc.
- Review the financial statements of the parent company to assess whether the parent company is in
a position to support LTL.
- Ascertain the form of support i.e. loan or equity injection and ensure that both the companies
would be able to comply with the relevant legal requirements.
- Review the business plans of LTL and assess whether it would be able to continue for the
foreseeable future and generate sufficient future profits/cashflows.
- After performing the above procedures, if there is a doubt about the appropriateness of the going
concern assumption, carryout additional audit procedures (including discussion with
management) depending upon the circumstances.

b) Although the auditors are not required to provide an opinion on other information in documents
containing financial statements, they are required to read the other information and consider its
consistency with the accounts in accordance with ISA 720 The auditor's responsibility in relation
to other information in documents containing audited financial statements.
As there is a material inconsistency between what has been reported in the financial statements
and what is stated in the directors' report, if the directors refuse to make any amendments to the
directors' report so that it is consistent with the accounts, then although an unmodified opinion on
the financial statements can be issued, an emphasis of matter paragraph should also be included to
highlight this inconsistency.

c) The firm’s assurance report should be modified. Lake has made an inappropriate assumption with
respect to revenue in its cash flow forecast which is significant. ISAE 3400 requires the firm to
issue an adverse modification. The report should state that the assumptions do not provide a
reasonable basis for the cash flow forecast and a paragraph describing the matter giving rise to the
modification should also be included and headed ‘basis for adverse conclusion’. The firm may
still be able to give an unmodified opinion that the cash flow forecast is properly prepared on the
basis of the assumptions.

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