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

Ridge Plc is a listed entity. The auditor has concluded that no material uncertainty exists about going concern, but events and conditions, including a covenant breach resolved by a waiver, required significant judgement by the auditor and were among the matters of most significance in the audit. How should the auditor report this matter?

The auditor should consider reporting it as a key audit matter under ISA 701, since it needed significant attention, but should not label it a material uncertainty. The separate Material Uncertainty section applies only where such an uncertainty exists, and Other Matter paragraphs are for different purposes.

  1. ANot report it, because an absence of material uncertainty means no reference is allowed
  2. BDescribe it in a Material Uncertainty Related to Going Concern section
  3. CConsider reporting it as a key audit matter in the Key Audit Matters section, without describing it as a material uncertaintyCorrect
  4. DReport it in an Other Matter paragraph

Explanation

Matters that required significant auditor attention, including going concern judgements where no material uncertainty exists, may be communicated as key audit matters under ISA 701. A material uncertainty section is reserved for cases where a material uncertainty actually exists. An Other Matter paragraph relates to matters not presented or disclosed in the financial statements.

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