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CA Intermediate · Auditing and Ethics · Audit Report

CA Neha is auditing a listed company, Orion Steels Ltd, whose management uses the going concern basis. She finds material uncertainty about going concern, which is adequately disclosed in the notes. Which statement describes her correct report?

The auditor gives an unmodified opinion and adds a separate section titled 'Material Uncertainty Related to Going Concern' pointing to the note. Under SA 570 (Revised), this applies when the uncertainty is adequately disclosed. Only inadequate disclosure would lead to a qualified or adverse opinion.

  1. AUnmodified opinion, with a separate section headed 'Material Uncertainty Related to Going Concern' drawing attention to the noteCorrect
  2. BQualified opinion, with the basis for qualified opinion section describing the uncertainty
  3. CAdverse opinion, because going concern doubt makes the statements misleading
  4. DUnmodified opinion with an Emphasis of Matter paragraph, since the 'Material Uncertainty' section is used only when disclosure is inadequate

Explanation

Under SA 570 (Revised), when the material uncertainty is adequately disclosed, the auditor expresses an unmodified opinion and includes a separate section 'Material Uncertainty Related to Going Concern' that draws attention to the disclosure. Option D reverses the rule: if disclosure is inadequate, the auditor qualifies or gives an adverse opinion. Options B and C wrongly modify the opinion despite adequate disclosure.

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