Material Uncertainty

AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

Question

During the audit of Darko Retail LTD, the audit team from Zalia Audit Firm observed that management has not performed a formal assessment of the entity’s ability to continue as a going concern. It was noted that though the financial statements show a favourable financial position, the company has been facing liquidity issues and has not been able to secure funds for a significant loan due shortly after the balance sheet date.

Required:
i) Outline FOUR factors that can raise questions about the going concern of Darko Retail LTD in the absence of a formal assessment by management.

ii) Describe how the audit team should report their findings related to the going concern assumption in their auditor’s report if they conclude that a material uncertainty exists but is not adequately disclosed in the financial statements.

Answer

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Tags: Audit opinion, Audit Risk, Auditor's Report, Financial Reporting, Financial Stability, Going Concern, Material Uncertainty
Level: Level 2

Topic: Completion Procedures and Reporting
Series: Nov 2024

AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

Question

(b) Describe the possible audit reports that can be issued where the going concern status of a company is called into question; your answer should describe the circumstances in which they can be issued. (5 marks)

Answer

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Tags: Audit opinion, Audit Reports, Going Concern, Material Uncertainty, Modifications
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2016

AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

Question

If indications are identified which suggest that the going concern basis might not be appropriate for preparing financial statements, the auditor is required by ISA 570 (Revised): Going Concern to consider the implications for his audit report. The form of the report will depend on the auditor’s judgement.

There are two possible views:

The use of the going concern is appropriate but material uncertainty exists or
The use of the going concern assumption is inappropriate.

Required:
i) Discuss THREE (3) reasons why management of a client’s company will probably be reluctant to include the disclosure about material uncertainty in relation to the going concern assumption.
(3 marks)

ii) State the auditor’s responsibility where the use of the going concern assumption is inappropriate.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit report, Auditor's responsibility, Going Concern, Material Uncertainty
Level: Level 3

Topic: Current issues
Series: AUG 2022

AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

Question

Required:
i) Outline FOUR factors that can raise questions about the going concern of Darko Retail LTD in the absence of a formal assessment by management.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit opinion, Audit Risk, Auditor's Report, Financial Reporting, Financial Stability, Going Concern, Material Uncertainty
Level: Level 2

Topic: Completion Procedures and Reporting
Series: Nov 2024

AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit opinion, Audit Reports, Going Concern, Material Uncertainty, Modifications
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2016

AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

Question

There are two possible views:

The use of the going concern is appropriate but material uncertainty exists or
The use of the going concern assumption is inappropriate.

ii) State the auditor’s responsibility where the use of the going concern assumption is inappropriate.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit report, Auditor's responsibility, Going Concern, Material Uncertainty
Level: Level 3

Topic: Current issues
Series: AUG 2022

Question Tag: Material Uncertainty

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AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

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Question Tag: Material Uncertainty

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AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

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AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

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AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

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AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

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AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

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AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

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