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CA Intermediate · Auditing and Ethics · Audit Report

Under SA 570 (Revised), the auditor of Lotus Steels Ltd concludes that a material uncertainty about going concern exists, and the financial statements adequately disclose it. What should the auditor's report include?

The auditor should give an unmodified opinion and include a separate section titled Material Uncertainty Related to Going Concern, drawing attention to the disclosure note. Modification is needed only if the disclosure of the uncertainty is inadequate.

  1. AAn unmodified opinion with a separate section headed 'Material Uncertainty Related to Going Concern'Correct
  2. BAn adverse opinion
  3. CA disclaimer of opinion
  4. DA qualified opinion on the ground of inadequate disclosure

Explanation

When a material uncertainty exists and is adequately disclosed, SA 570 requires an unmodified opinion and a separate section 'Material Uncertainty Related to Going Concern' referring to the disclosure note. A qualified or adverse opinion applies only if disclosure is inadequate.

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