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11/16/2018

MPACC 1305: Contemporary Issues in Auditing and


Assurance
Completing the Audit, Reporting to Management and External Reporting

- Emphasis of Matter Paragraphs and Other Matter Paragraphs in


the Independent Auditor’s Report [ISA 706 (Revised)]

- Implications to the Independent Auditor's Report in relation to


Use of Going concern Assumption in Preparing the Financial
Statements [ISA 570 (Revised)]
By: Vajira Lakdeva

Emphasis of Matter
Paragraphs and Other Matter
Paragraphs in the Independent
Auditor’s Report

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Objectives under ISA 706 (Revised)

The objective of the auditor, having formed an opinion on the financial statements, is
to draw users’ attention, when in the auditor’s judgment it is necessary to do so, by
way of clear additional communication in the auditor’s report, to:

a) A matter, although appropriately presented or disclosed in the financial


statements, that is of such importance that it is fundamental to users’
understanding of the financial statements; or

b) As appropriate, any other matter that is relevant to users’ understanding of the


audit, the auditor’s responsibilities or the auditor’s report.

ISA 706 - Emphasis of Matter Paragraphs and Other Matter


Paragraphs in the Independent Auditor’s Report

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Circumstances in Which an Emphasis of Matter Paragraph May


Be Necessary

• When a financial reporting framework prescribed by law or


regulation would be unacceptable but for the fact that it is
prescribed by law or regulation.

• To alert users that the financial statements are prepared in


accordance with a special purpose framework.

• When facts become known to the auditor after the date of the
auditor’s report and the auditor provides a new or amended
auditor’s report (i.e., subsequent events)

Circumstances in Which an Emphasis of Matter Paragraph May


Be Necessary

 An uncertainty relating to the future outcome of exceptional litigation or regulatory action.

 Early application (where permitted) of a new accounting standard (for example, a new Sri Lanka
Accounting Standard) that has a material effect on the financial statements in advance of its
effective date.

 A major catastrophe that has had, or continues to have, a significant effect on the entity’s financial
position.

 A significant subsequent event that occurs between the date of the financial statements and the
date of the auditor’s report.

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Circumstances in Which an Other of Matter Paragraph May Be


Necessary

1. Relevant to Users’ Understanding of the Audit

In the rare circumstance where the auditor is unable to withdraw from an engagement even though
the possible effect of an inability to obtain sufficient appropriate audit evidence due to a limitation on
the scope of the audit imposed by management is pervasive, the auditor may consider it necessary to
include an Other Matter paragraph in the auditor’s report to explain why it is not possible for the
auditor to withdraw from the engagement.

2. Relevant to Users’ Understanding of the Auditor’s Responsibilities or the Auditor’s Report

Law, regulation or generally accepted practice in a jurisdiction may require or permit the auditor to
elaborate on matters that provide further explanation of the auditor’s responsibilities in the audit of
the financial statements or of the auditor’s report thereon.

Circumstances in Which an Other of Matter Paragraph May Be


Necessary

3. Reporting on more than one set of financial statements

An entity may prepare one set of financial statements in accordance with a general purpose
framework (e.g., the national framework) and another set of financial statements in accordance with
another general purpose framework (e.g., International Financial Reporting Standards), and engage
the auditor to report on both sets of financial statements. If the auditor has determined that the
frameworks are acceptable in the respective circumstances, the auditor may include an Other Matter
paragraph in the auditor’s report, referring to the fact that another set of financial statements has
been prepared by the same entity in accordance with another general purpose framework and that
the auditor has issued a report on those financial statements.

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Circumstances in Which an Other of Matter Paragraph May Be


Necessary

4. Restriction on distribution or use of the auditor’s report

Financial statements prepared for a specific purpose may be prepared in accordance with a
general purpose framework because the intended users have determined that such general
purpose financial statements meet their financial information needs. Since the auditor’s report
is intended for specific users, the auditor may consider it necessary in the circumstances to
include an Other Matter paragraph, stating that the auditor’s report is intended solely for the
intended users, and should not be distributed to or used by other parties.

Circumstances in Which an Other of Matter Paragraph May Be


Necessary
5. Prior Period Financial Statements Audited by a Predecessor Auditor

If the financial statements of the prior period were audited by a predecessor auditor and the
auditor is not prohibited by law or regulation from referring to the predecessor auditor’s report
on the corresponding figures and decides to do so, the auditor shall state in an Other Matter
paragraph in the auditor’s report:

a. That the financial statements of the prior period were audited by the predecessor auditor;

b. The type of opinion expressed by the predecessor auditor and, if the opinion was modified,
the reasons therefore; and

c. The date of that report.

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Circumstances in Which an Other of Matter Paragraph May Be


Necessary

6. Prior Period Financial Statements Not Audited

If the prior period financial statements were not audited, the auditor shall state in an Other
Matter paragraph in the auditor’s report that the corresponding figures are unaudited. Such a
statement does not, however, relieve the auditor of the requirement to obtain sufficient
appropriate audit evidence that the opening balances do not contain misstatements that
materially affect the current period’s financial statements.

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Illustration of an Independent Auditor’s Report that Includes an Emphasis of Matter


Paragraph and an Other Matter Paragraph
Opinion
and anaudited
We have Other theMatter Paragraph
consolidated financial statements of the Group, which comprise the consolidated statement
of financial position as at 31 March 2018, and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to
the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, (or give
a true and fair view of) the financial position of ABC Company and its subsidiaries (the Group) as at 31 March
2018, and (of) their consolidated financial performance and their consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion


We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group within the meaning of [indicate relevant
ethical requirements or applicable law or regulation] and have fulfilled our other responsibilities under those
ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.

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Illustration of an Independent Auditor’s Report that Includes an Emphasis of Matter


Paragraph and an Other Matter Paragraph
Emphasis of Matters
We draw attention to Note X of the financial statements, which describes the effects of a fire in the
Company’s production facilities.
We draw attention to Note Y to the financial statements which describes the uncertainty related to the
outcome of the lawsuit filed against the company by XYZ Company.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. We have determined the matters described below to be the key audit matters to be communicated
in our report.
[Description of each key audit matter in accordance with ISA 701.]

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Illustration of an Independent Auditor’s Report that Includes an Emphasis of Matter


Paragraph and an Other Matter Paragraph

Other Matter
The financial statements of ABC Company for the year ended 31 March 2017 were audited by another auditor
who expressed an unmodified opinion on those statements on 27 June 2017.

OR

The financial statements of ABC Company for the year ended 31 March 2017 were audited by another auditor
who expressed a qualified opinion on 27 June 2017 on those statements in relation to the inability to obtain
comfort on existence of inventories as at 31 March 2017.

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Implications to the Independent


Auditor's Report in Relation to Use of
Going concern Assumption in
Preparing the Financial Statements

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Introduction & Scope of the Standard

This International Standard on Auditing (ISA) deals with the auditor’s


responsibilities in the audit of financial statements relating to going concern and
the implications for the auditor’s report. ISA 701; Communicating Key Audit
Matters in the Independent Auditor’s Report, deals with the auditor’s responsibility
to communicate key audit matters in the auditor’s report. ISA 701 acknowledges
that, when ISA 701 applies, matters relating to going concern may be determined
to be Key Audit Matters (KAM), and explains that a material uncertainty related to
events or conditions that may cast significant doubt on the entity’s ability to
continue as a going concern is, by its nature, a key audit matter.

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Introduction to Going Concern Assumption


What is Going Concern Assumption?
Under the going concern assumption, an entity is viewed as continuing in business for the
foreseeable future.

General purpose financial statements are prepared on a going concern basis, unless management
either intends to liquidate the entity or to cease operations, or has no realistic alternative but to
do so. Special purpose financial statements may or may not be prepared in accordance with a
financial reporting framework for which the going concern basis is relevant (for example, the
going concern basis is not relevant for some financial statements prepared on a tax basis in
particular jurisdictions).

When the use of the going concern assumption is appropriate, assets and liabilities are recorded
on the basis that the entity will be able to realise its assets and discharge its liabilities in the
normal course of business.

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Introduction to Going Concern Assumption


Examples
1) An oil and gas firm operating in Sri Lanka is stopped by a Sri Lankan court from carrying out operations in
Sri Lanka.

The firm is not a going concern in Sri Lanka, because it has to be shut down.

2) A nationalised refinery is in cash flows problems but the government of the country provided a guarantee
to the refinery to help it out with all payments.

The refinery is a going concern despite poor financial position

3) A bank is in serious financial troubles and the government is not willing to bail it out. The Board of
Directors has passed a resolution to liquidate the business.

The bank is not a going concern.

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Introduction to Going Concern Assumption


Examples
4) A merchandising company has a current ratio below 0.5. A creditor $1,000,000 demanded payment which
the company could not make. The creditor requested the court to liquidate the business and recover his debts
and the court grants the order.

The entity is no longer a going concern

5) The entity X is making continuous losses over the years and as a result its net assets are deteriorating with
net current liability position. The parent entity has provided a letter of financial support that it will render all
necessary financial assistance for next 12 months to allow the entity X to continue in business without
curtailing any of its major operations.

The entity X is a going concern despite its poor financial performance and position.

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Introduction to Going Concern Assumption


A Real Life Example – Sri Lankan Airlines (Details for summary were extracted from Annual
Report 2016/17)
Soruce - http://www.srilankan.com/a/coporate/annual-reports

6) Sri Lankan Airlines has recorded a loss of LKR 28,930 Mn in 2017 (2016 – LKR 12,622 Mn) with an accumulated loss of LKR
169,755 Mn (2016 – LKR 141,080 Mn). Further, the Company has a net current liability position of LKR 99,328 Mn (2016 – LKR
73,433 Mn) with a net liability position of LKR 115,767 Mn (2016 – LKR 87,781 Mn).

The entity is a going concern despite its poor financial performance and position due to following mitigating actions as per
the management assessment of entity’s ability to continue as a going concern.

● Restructuring process initiated by the BoDs in 2015 over five key areas, namely,
◊ Restructuring of the route network
◊ Restructuring of the aircraft fleet
◊ Restructuring of the overheads
◊ Restructuring of the debt (re-capitalisation)
◊ Restructuring of the organisational structure

● Confirmation given by the GOSL by a way of Cabinet approval dated 18 July 2017 to extend the required financial
support to the Company to continue its operations as “Going Concern” until the proposed restructuring process is complete
[Letter of financial support from GOSL].

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Introduction to Going Concern Assumption


A Real Life Example – Sri Lankan Airlines (Details for summary were extracted from Annual Report
2016/17)
Following is the extract from the financial statements of Sri Lankan Airlines.
Emphasis of Matter paragraph given in the Auditor’s report

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Introduction to Going Concern Assumption


A Real Life Example – Sri Lankan Airlines (Details for summary were extracted from Annual Report
2016/17)

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Responsibility for Assessment of the Entity’s Ability to


Continue as a Going Concern
Some financial reporting frameworks contain an explicit requirement for management to make a specific
assessment of the entity’s ability to continue as a going concern, and standards regarding matters to be
considered and disclosures to be made in connection with going concern. For example, Sri Lanka Accounting
Standard (LKAS) 1 requires management to make an assessment of an entity’s ability to continue as a going
concern.

Management’s assessment of the entity’s ability to continue as a going concern involves making a judgement, at
a particular point in time, about inherently uncertain future outcomes of events or conditions. Factors to
consider:

 The degree of uncertainty associated with the outcome of an event or condition increases significantly the
further into the future an event or condition or the outcome occurs;

 The size and complexity of the entity, nature & condition of its business and the degree to which it is affected
by external factors; and

 Any judgment about the future is based on information available at the time at which the judgement is made.
Subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the
time they were made.
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Accounting Standards Perspective


LKAS 1 – Presentation of Financial Statements
• Require that when preparing financial statements, management shall make an
assessment of the entity’s ability to continue as going concern.

• An entity shall prepare financial statements on going concern basis unless


management either intend to liquidate the entity or to cease the trading or has no
realistic alternative but to do so.

• The assessment should cover 12 months period from the end of financial period.

• When management is aware in making its assessment of material uncertainties related


to the events or conditions that may cast significant doubt upon the entity's ability to
continue as a gong concern the entity shall disclose those uncertainties.

• When an entity does not prepare its financial statements on a going concern basis it
shall disclose the fact together with the basis on which it prepared the financial
statements and the reason why the entity is not regarded as a going concern.
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Requirements
Risk Assessment Procedures and Related Activities
Events and Conditions that may cast doubt about Going Concern Assumption (Individually or collectively)

Net liability or net current liability position

Fixed-term borrowings approaching maturity without realistic prospects of renewal or


repayment; or excessive reliance on short term borrowings to finance long-term assets

Indications of withdrawal of financial support by creditors

Negative operating cash flows indicated by historical or prospective financial statements

Adverse key financial ratios


Financial
Substantial operating losses or significant deterioration in the value of assets used to generate
cash flows

Arrears or discontinuance of dividends


Inability to pay creditors on due dates

Inability to comply with the terms of loan agreements


Change from credit to cash-on-delivery transactions with suppliers

Inability to obtain financing for essential new product development or other essential
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Requirements
Risk Assessment Procedures and Related Activities
Events and Conditions that may cast doubt about Going Concern Assumption (Individually or collectively)

Management intentions to liquidate the entity or to


cease operations

Loss of key management without replacement

Loss of a major market, key customer(s), franchise, license, or


principal supplier(s)
Operating
Labour difficulties

Shortages of important supplies

Emergence of a highly successful competitor


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Requirements
Risk Assessment Procedures and Related Activities

Events and Conditions that may cast doubt about Going Concern Assumption (Individually or collectively)

Non-compliance with capital or other statutory


requirements

Pending legal or regulatory proceedings against the entity


that may, if successful, result in claims that the entity is
unlikely to be able to satisfy
Other
Changes in law or regulation or government policy
expected to adversely affect the entity

Uninsured or underinsured catastrophes when they occur

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Auditor Conclusions & Implications for the Auditor’s Report


The auditor shall evaluate whether sufficient appropriate audit evidence has been obtained
regarding, and shall conclude on, the appropriateness of management’s use of the going concern
basis of accounting in the preparation of the financial statements.

Based on the audit evidence obtained, the auditor shall conclude whether, in the auditor’s
judgement, a material uncertainty exists related to events or conditions that, individually or
collectively, may cast significant doubt on the entity’s ability to continue as a going concern. A
material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence
is such that, in the auditor’s judgment, appropriate disclosure of the nature and implications of the
uncertainty is necessary.

What is a Material Uncertainty?

A material uncertainty is one relating to events or conditions that may cast significant doubt on the
entity’s ability to continue as a going concern and that may, therefore, indicate that it may be
unable to realise its assets and discharge its liabilities in the normal course of business.
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Implications for the Auditor’s Report

Implications when events or conditions have been Identified that may cast doubt
over an entity’s ability to continue as a going concern

Use of Going Concern Basis of Accounting Is Inappropriate

If the financial statements have been prepared using the going concern basis of
accounting but, in the auditor’s judgment, management’s use of the going concern
basis of accounting in the preparation of the financial statements is inappropriate,
the auditor shall express an adverse opinion regardless of whether or not the
financial statements include disclosure of the inappropriateness of management’s
use of the going concern basis of accounting.

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Implications for the Auditor’s Report


Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty
Exists

a) Adequate Disclosure of a Material Uncertainty Is Made in the Financial Statements

If adequate disclosure about the material uncertainty is made in the financial statements, the auditor
shall express an unmodified opinion and the auditor’s report shall include a separate section under the
heading “Material Uncertainty Related to Going Concern” to:

a) Draw attention to the note in the financial statements that discloses the relevant matters; and

b) State that these events or conditions indicate that a material uncertainty exists that 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.

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Implications for the Auditor’s Report


Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists

a) Adequate Disclosure of a Material Uncertainty Is Made in the Financial Statements

Example – unmodified audit opinion but material uncertainty exists in relation to going concern
and the disclosures are adequate

Report on the Audit of the Financial Statements (extract)

Opinion
We have audited the financial statements of ABC Company (the Company), which comprise the
statement of financial position as at 31 March 2018, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as at 31 March 2018, and its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion


We conducted our audit in accordance with International Standards on Auditing (ISAs) ……………………
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Implications for the Auditor’s Report


Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists

a) Adequate Disclosure of a Material Uncertainty Is Made in the Financial Statements

Material Uncertainty Related to Going Concern

We draw attention to Note 6 in the financial statements, which indicates that the Company incurred a net loss
of $125,000 during the year ended 31 March 2018 and, as of that date, the Company’s current liabilities
exceeded its total assets by $106,000. As stated in Note 6, these events or conditions, along with other
matters as set forth in Note 6, indicate that a material uncertainty exists that may cast significant doubt on
the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
Concern section, we have determined the matters described below to be the key audit matters to be
communicated in our report.
[Description of each key audit matter in accordance with ISA 701]
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Implications for the Auditor’s Report


Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists

b) Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Statements

The auditor shall:

a) Express
 A Qualified Opinion [Disclosure in the Financial Statements is Inadequate] or

 An Adverse Opinion [Disclosure in the Financial Statements Omit the Required Disclosure Relating to a
Material Uncertainty],

as appropriate, in accordance with ISA 705 (Revised); and


b) In the Basis for Qualified (Adverse) Opinion section of the auditor’s report, state that a material uncertainty
exists that may cast significant doubt on the entity’s ability to continue as a going concern and that the
financial statements do not adequately disclose this matter.

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Implications for the Auditor’s Report


b) Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Statements
Audit Reporting When Auditor Concluded that a Material Uncertainty Exists and Disclosure in the Financial
Statements Is Inadequate. The Financial Statements Are Materially Misstated Due to Inadequate Disclosure

Report on the Audit of the Financial Statements (extract)

Qualified Opinion

We have audited the financial statements of ABC Company (the Company), which comprise the
statement of financial position as at 31 March 2018, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to
the financial statements, including a summary of significant accounting policies.

In our opinion, except for the incomplete disclosure of the information referred to in the Basis for
Qualified Opinion section of our report, the accompanying financial statements present fairly, in all
material respects (or give a true and fair view of), the financial position of the Company as at 31
March 2018, and (of) its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRSs).
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Implications for the Auditor’s Report


b) Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Statements

Audit Reporting When Auditor Concluded that a Material Uncertainty Exists and Disclosure in the Financial
Statements Is Inadequate. The Financial Statements Are Materially Misstated Due to Inadequate Disclosure

Basis for Qualified Opinion

As discussed in Note yy, the Company’s financing arrangements expire and amounts outstanding are payable on 31
December 2016. The Company has been unable to conclude re-negotiations or obtain replacement financing. This
situation indicates that a material uncertainty exists that may cast significant doubt on the Company’s ability to
continue as a going concern. The financial statements do not adequately disclose this matter.

We conducted our audit in accordance with International Standards on Auditing (ISAs). …………….

Key audit matters

Key audit matters are those matters that, ……………….. on these matters. In addition to the matter described in
the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
[Description of each key audit matter in accordance with ISA 701]
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Implications for the Auditor’s Report


b) Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Statements
Audit Reporting When Auditor Concluded that a Material Uncertainty Exists and Disclosure in the Financial Statements
Omit the Required Disclosure Relating to a Material Uncertainty

Report on the Audit of the Financial Statements (extract)

Adverse Opinion
We have audited the consolidated financial statements of ABC Company and its subsidiaries (the Group), which comprise the consolidated statement
of financial position as at 31 March 2018, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.

In our opinion, because of the omission of the information mentioned in the Basis for Adverse Opinion section of our report, the accompanying
financial statements do not present fairly (or do not give a true and fair view of), the financial position of the Company as at 31 March 2018, and of its
financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Adverse Opinion


The Company’s financing arrangements expired and the amount outstanding was payable on 31 March 2018. The Company has been unable to
conclude re-negotiations or obtain replacement financing and is considering filing for bankruptcy. This situation indicates that a material uncertainty
exists that may cast significant doubt on the Company’s ability to continue as a going concern. The financial statements do not adequately disclose this
fact.
We conducted our audit in accordance with International Standards on Auditing (ISAs). ………………………….

Key audit matters


Except for the matter described in the Basis for Adverse Opinion section, we have determined that there are no key audit matters to communicate in
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Implications for the Auditor’s Report


b) Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Statements

Audit Reporting When Auditor Concluded that a Material Uncertainty Exists and Disclosure in the Financial
Statements Omit the Required Disclosure Relating to a Material Uncertainty

When the auditor expresses a qualified or adverse opinion, the requirement to communicate
other KAM is still relevant and hence will still apply.

When the auditor issues an adverse opinion it means that the financial statements do not give
a true and fair view (or present fairly) because the auditor has concluded that misstatements,
individually and in aggregate, are both material and pervasive to the financial statements.

Depending on the significance of the matter(s) which has resulted in the auditor expressing an
adverse audit opinion, the auditor might determine that no other matters are KAM. In this
situation, the auditor will deal with the matter(s) in accordance with applicable ISAs and include
a reference to the Basis for Qualified/Adverse Opinion or the Material Uncertainty Related to
Going Concern section(s) in the KAM section of the report.

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Implications for the Auditor’s Report


ISA 570 [Previous] ISA 570 [Revised]

GC basis is appropriate GC basis is appropriate

But, significant uncertainty exists But, significant uncertainty exists

Appropriately disclosed is the F/S Appropriately disclosed is the F/S

EoM paragraph immediately after the opinion Auditor must include a separate section under the
paragraph with reference to relevant disclosure in heading “Material Uncertainty Related to GC”
the F/S. Need to emphasize that the opinion is not immediately after “Basis of Opinion” paragraph but
qualified before KAM

ISA 570 [Previous / Revised]

Material uncertainty exists and not adequately disclosed in


F/S

Modify opinion in line with ISA 705 (Revised) Modifications to the Opinion in the
Independent Auditor’s Report (Qualified or Adverse Opinion)
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Implications for the Auditor’s Report


Events or conditions have been identified that may cast doubt over an entity’s
ability to continue as a going concern

Going Concern
• Adverse opinion
Is the going concern assumption still • A description of this circumstance in the Basis for Adverse
appropriate? No Opinion section
• Reference to the basis for Adverse Opinion in “KAM” Section
Yes

• Unmodified opinion
Does a material uncertainty exist? • Report as KAM –”Close Call”
No

Yes
• Qualified or Adverse 0pinion as appropriate
Is there adequate financial reporting • A description of this circumstance in the Basis for
disclosure? No Qualified / Adverse Opinion section
• Reference to the basis for Qualified/Adverse Opinion in
the KAM section
Yes

• Unmodified opinion
• Material Uncertainty Related to Going Concern paragraph
• Reference in KAM section
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Any Questions?

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Thank You

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