ACCA Strategic Professional · Advanced Audit and Assurance (International) · Subsequent events and going concern
Calder plc's auditor concludes that a material uncertainty exists over going concern. The financial statements are prepared on a going concern basis and disclose the events, conditions and management's plans adequately. What is the correct form of auditor's report?
The auditor issues an unmodified opinion with a separate section titled 'Material uncertainty related to going concern', because disclosure is adequate. Modification is needed only if disclosure is inadequate, and the matter is not reported as a key audit matter.
- AUnmodified opinion with a separate section headed 'Material uncertainty related to going concern'Correct
- BQualified opinion because of the uncertainty
- CUnmodified opinion with the matter included only as a key audit matter
- DAdverse opinion because going concern is in doubt
Explanation
Where adequate disclosure is made of a material uncertainty, ISA 570 (Revised) requires an unmodified opinion with a separate section under the heading 'Material uncertainty related to going concern' drawing attention to the note. Including it only as a key audit matter is wrong because such matters are specifically excluded from key audit matters. A qualified or adverse opinion arises if disclosure is inadequate or the basis is inappropriate.
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