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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Subsequent events and going concern

Kora Co's directors have prepared financial statements on a going concern basis. The auditor concludes a material uncertainty exists, but the notes make no mention of it, despite the auditor's request that management add disclosure. What opinion should the auditor express under ISA 570 (Revised)?

The auditor should give a qualified or adverse opinion under ISA 705, depending on how material and pervasive the omission is, and explain in the basis for opinion that an undisclosed material uncertainty exists. Emphasis of Matter cannot replace management's required disclosure.

  1. AUnmodified opinion with an Emphasis of Matter paragraph describing the uncertainty
  2. BQualified or adverse opinion, depending on the materiality and pervasiveness of the omission, explaining the uncertainty in the basis for opinion sectionCorrect
  3. CDisclaimer of opinion because the auditor cannot obtain evidence on future events
  4. DUnmodified opinion with a Key Audit Matter section covering going concern

Explanation

If adequate disclosure of a material uncertainty is not made, ISA 570 requires a qualified or adverse opinion under ISA 705, depending on the materiality and pervasiveness of the omission. The report should state in the basis for opinion that a material uncertainty exists and is not adequately disclosed. An Emphasis of Matter cannot substitute for missing management disclosure.

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