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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

A listed company's auditor has doubts about whether the company can continue as a going concern. The directors have disclosed the uncertainty adequately in the notes, and the accounts have been prepared on a going concern basis. Which treatment in the audit report is most appropriate?

The auditor should give an unmodified opinion and add a separate material uncertainty related to going concern section pointing to the note. The basis is appropriate and the disclosure adequate, so no modification is needed. Adverse or disclaimer opinions would apply only if the basis is inappropriate or evidence is missing.

  1. AInclude a section on material uncertainty related to going concern while giving an unmodified opinionCorrect
  2. BIssue an adverse opinion because the going concern basis is inappropriate
  3. CIssue a disclaimer of opinion because future events cannot be audited
  4. DOmit any reference because disclosure in the notes is enough
  5. Issue a qualified opinion because the uncertainty exists

Explanation

Where the going concern basis is appropriate and a material uncertainty is adequately disclosed, the auditor keeps an unmodified opinion and adds a separate section drawing attention to the uncertainty. An adverse opinion applies only if the basis is inappropriate or disclosure is inadequate. Omitting any reference would hide a key matter for users.

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