ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
Near completion of the audit of Quill Co, the auditor notes management's draft going concern disclosures were inadequate. Management refuses to expand them, and the auditor concludes a material uncertainty exists. Which is the correct effect on the auditor's opinion?
The auditor should issue a qualified or adverse opinion because the financial statements fail to adequately disclose the material uncertainty. A material uncertainty section with an unmodified opinion is only appropriate when disclosure is adequate, so the refusal to expand disclosures forces a modification.
- AA qualified or adverse opinion, because the financial statements do not adequately disclose the material uncertaintyCorrect
- BAn unmodified opinion with a material uncertainty related to going concern section
- CAn emphasis of matter paragraph only
- DA disclaimer of opinion because management refused disclosure
Explanation
Where a material uncertainty exists and disclosure is inadequate, ISA 570 requires a qualified or adverse opinion, depending on pervasiveness, with the basis for modification explaining the inadequacy. The unmodified opinion with a material uncertainty section applies only when disclosure is adequate. Disclaimer is for inability to obtain evidence, not inadequate disclosure.
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