F8審計報告變化：GOING CONCERN

REPORTING IN LINE WITH ISA 570, GOING CONCERN

Exam questions might ask the candidate to recognise indicators that an entity may not be a going concern, or require candidates to arrive at an appropriate audit opinion depending on the circumstances presented in the scenario. It may be the case that candidates are presented with a situation where the auditor has concluded that there are material uncertainties relating to going concern and the directors have made appropriate disclosures in relation to going concern and candidates must understand the new auditor reporting requirements in this respect.

The auditor’s work in relation to going concern has been enhanced in ISA 570 (Revised), Going Concern and the revised ISA includes additional guidance relating to the appropriateness of disclosures when a material uncertainty exists. Under the previous version of ISA 570, if the auditor concluded that the going concern basis of accounting is appropriate, but a material uncertainty exists and this material uncertainty had been adequately disclosed in the financial statements, the auditor would include an Emphasis of Matter paragraph immediately after the Opinion paragraph which would be cross-referenced to the relevant disclosure note in the financial statements. The auditor would also emphasise that their opinion is not modified in respect of the material uncertainty. This requirement has changed in the revised ISA 570 and the use of an Emphasis of Matter paragraph is no longer appropriate.

Under ISA 570 (Revised), if the use of the going concern basis of accounting is appropriate but a material uncertainty exists and management have included adequate disclosures relating to the material uncertainties the auditor will continue to express an unmodified opinion, but the auditor must include a separate section under the heading ‘Material Uncertainty Related to Going Concern’ and:

• draw attention to the note in the financial statements that discloses the matters giving rise to the material uncertainty, and

• state that these events or conditions indicate that a material uncertainty exists which may cast significant doubt on the entity’s ability to continue as a going concern and that the auditor’s opinion is not modified in respect of the matter.

The section headed ‘Material Uncertainty Related to Going Concern’ is included immediately after the Basis for Opinion paragraph but before the KAM section. It should be noted that where the uncertainty is not adequately disclosed in the financial statements the auditor would continue to modify the opinion in line with ISA 705,Modifications to the Opinion in the Independent Auditor’s Report.

Over and above the new reporting requirements under ISA 570, candidates need to understand how issues identified regarding going concern interact with the requirements of ISA 701. By their very nature, issues identified relating to going concern are likely to be considered a key audit matter and hence need to be communicated in the auditor’s report. Where the auditor has identified conditions which cast doubt over going concern, but audit evidence confirms that no material uncertainty exists, this ‘close call’ can be disclosed in line with ISA 701. This is because while the auditor may conclude that no material uncertainty exists, they may determine that one, or more, matters relating to this conclusion are key audit matters. Examples include substantial operating losses, available borrowing facilities and possible debt refinancing, or non-compliance with loan agreements and related mitigating factors.