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

Zephyr Ltd's directors have prepared financial statements on a going concern basis. The auditor concludes that a material uncertainty exists related to going concern, that the use of the going concern basis is appropriate, and that the financial statements adequately disclose the uncertainty. Which auditor's report treatment is required under ISA 570 (Revised)?

The auditor issues an unmodified opinion and adds a separate section titled Material Uncertainty Related to Going Concern, pointing to the financial statement note. A modified opinion is not needed because the basis is appropriate and disclosure is adequate.

  1. AAn unmodified opinion with a separate section headed 'Material Uncertainty Related to Going Concern'Correct
  2. BA qualified opinion on the basis of a disagreement with management
  3. CAn adverse opinion because the entity may not continue as a going concern
  4. DAn unmodified opinion with the matter included only within Key Audit Matters

Explanation

Where the going concern basis is appropriate and the material uncertainty is adequately disclosed, the opinion is unmodified. The report must include a separate section headed 'Material Uncertainty Related to Going Concern' that refers to the note. Reporting it only as a key audit matter is wrong because the separate section is mandatory.

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