A company’s account shows a true and fair view and is free from material misstatements(we have determined this after conducting our audit). However, the Industry within which the business operates is extremely high risk with very high rates of business failure(lets say IT).
This is the first audit we have done for the company, and as a result, we have assessed the company and have seen that because of the high risk nature of the business, we should have an emphasis of matter in our report. However, we have also determined that the previous auditors also had this view of the company as being high risk, but they never modified the report, because according to them “whilst the industry is volatile, we have never come across a situation that gave us the impression that the company would not be a going concern”.
With this said, I also know that the opinion we give is based on our own assessment as we are the responsible party. Should we modify our report on the grounds of ‘other matter’ or ‘emphasis of matter’, as the issue is related to true and fair, in terms of possible going concerns (based on industry standards) but the company itself has been surviving successfully in this market for several years now.
I cannot imagine why you would modify your report – just because it’s a risky business sector? Surely, given there are no indications of going concern issues, there really is no justification for modification. A reader / user of the financial statements will presumably already be aware of the risky nature of the industry.
It sounds to me to be more likely a matter to include within the “Management commentary” rather than getting a mention within the audit report.
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