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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Auditor's reports

Auditor Mwangi is reporting on Delta plc, a listed entity. A material uncertainty on going concern exists and is adequately disclosed in the financial statements. Which treatment of this matter is correct under ISA 570 (Revised) and ISA 706 (Revised)?

The auditor should give an unmodified opinion and include a separate section headed Material Uncertainty Related to Going Concern. Because the uncertainty is adequately disclosed, no modification is needed, and the dedicated section is used instead of an Emphasis of Matter paragraph.

  1. AUse an Emphasis of Matter paragraph under the heading Basis for Opinion
  2. BInclude a separate section headed Material Uncertainty Related to Going Concern, rather than an Emphasis of Matter paragraphCorrect
  3. CReport the matter as a Key Audit Matter only, with no separate section
  4. DModify the opinion to qualified because the uncertainty exists

Explanation

Where adequate disclosure is made of a material uncertainty, the auditor expresses an unmodified opinion and includes a separate section titled Material Uncertainty Related to Going Concern. This replaces the use of an Emphasis of Matter paragraph for this matter. Such matters are by nature of most significance, but they are not reported as a Key Audit Matter.

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