Material inconsistencies, going concern

“If there are material inconsistency between the f/s and other info, description of the inconsistencies should be mentioned in the other matters paragraph and modified report with unmodified opinion is issued”

Not necessarily!

If there is an inconsistency, then at least one (and possibly both) matters are incorrect. If the incorrect one is within the financial statements, then steps need to be taken to correct it. It may be immaterial quantitatively but it is certainly material qualitatively

But before charging into modifying audit reports and possibly audit opinions, steps should be taken to determine how and why the inconsistency arose and has not been rectified

“If prepared on the right basis …” – I presume that you mean that the financial statements have been prepared on the basis that the entity will continue in operational existence with neither the need nor intention significantly to curtail the scale of operations of the enterprise in the foreseeable future

If there are issues concerning going concern (here’s an extract from the recent article in Student Accountant)

“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.”

But then we have to consider ‘close calls’, as follows:

“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”

There is an example within the article (https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/auditor-report.html) of an audit report with a close call paragraph

If the basis for the preparation of the financial statements is not appropriate then, yes, a pervasive adverse opinion would be applicable

OK?