CA Intermediate · Auditing and Ethics · Audit Report
CA Rohit is auditing Mehta Steels Ltd. Management has used the going concern basis. The auditor finds a material uncertainty about going concern, the financial statements adequately disclose it, and the disclosure is clear about the uncertainty and management's plans. What should the auditor's report contain?
The auditor should give an unmodified opinion and include a separate section headed Material Uncertainty Related to Going Concern that draws attention to the disclosure. Because the uncertainty is adequately disclosed, SA 570 does not require a qualified, adverse or disclaimed opinion.
- AA qualified opinion with an 'except for' paragraph on going concern
- BAn adverse opinion because going concern is doubtful
- CA disclaimer of opinion because the future is uncertain
- DAn unmodified opinion with a separate section headed 'Material Uncertainty Related to Going Concern' drawing attention to the disclosureCorrect
Explanation
Under SA 570, when a material uncertainty exists and adequate disclosure is made, the auditor expresses an unmodified opinion and includes a separate section titled Material Uncertainty Related to Going Concern. A qualified or adverse opinion is needed only if disclosure is inadequate, or if the going concern basis is inappropriate. A disclaimer is not warranted since evidence was obtained.
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