• You are job charge of auditing Fareed Textile Mills Limited for the year ended 30 June 2019. The final draft of the financial statements included a disclosure in note 26 of the financial statements which read as follows: During the year a show cause notice has been issued by FBR for the recovery of Income Tax amounting Rs. 65 million. The Company has responded to show cause however, the concerned income tax commissioner has issued a recovery order for the same. The company has filed an appeal with the tribunal and the decision against the appeal is pending. The legal counsel of the Company is confident the case will be decided in favor of the Company. The financial statements are complete with respect to this matter.
• You are required to consider the impact of the above disclosure on the audit report and prepare relevant extracts of the report.
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