I always thought that when the item is material we have a modified opinion. However, when I was doing some exercises I stumbled upon the following terminology which got me pretty confused “non-adjusting material events” and it was regarding matters after the BS date. Now how do I know when the question regarding audit reporting comes – do we modify the report or not when there are material issues after BS date?
See s.3 in Chapter 5 where the elements are listed and the order explained. MURGC before KAM(if relevant)/EoM(if any). Order of KAM/EoM depends on the auditor’s judgment of relative importance. Please remember to use the FORUM (which is where I answer technical questions every dat) https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-audit-and-assurance-aa-exams for questions rather than here (which is for comments).
Hi Sir, Thank you so much for this great lectures. I have a question about going concern issues. If directors have prepared the accounts on break-up basis do we still include material uncertainty paragraph in the auditor’s report or we only include EoM paragraph?
In technical terms, “modified” refers to the audit opinion. An audit opinion is either unmodified or modified. If it’s modified that means qualified, except for or adverse.
I still need some clarification please regarding Going Concern.
I don’t understand why there is a separate paragraph for ‘Material Uncertainty relating to Going Concern’ but then it also has to be disclosed in the ‘Emphasis of Matter Paragraph’
Also, how can Material Uncertainty relating to Going Concern not affect the auditor’s opinion if not adequately disclosed which is what is shown on the diagram on the first page of the lecture notes, and described in the lecture itself.
If there is a meterial uncertainty as to going concern paragraph, then this is not repeated in an EoM para.
If a material uncertainty as to going concern is properly disclosed in the FS then the audit opinion is not affected, though the audit report is affected by adding the material uncertainty a out going concern paragraph.
Now there is a special paragraph added after the opinion paragraph if there is material uncertainty about going concern. It operates like and EoM, but has a different title.
If there is a need for and EoM as well (for example like above when there is a law case) there would be two paragraphs: EoM and material uncertainty about goving concern
Respected sir, I have Following Question Will you please guideline Me 1-Emphasis of Matter Paragraph will be included before Opinion paragraph for better understanding of user Entity if Report is Qualified is it ”OK” 2-Emphasis of Matter Paragraph will reached Always Before Opinion Paragraph ??? 3- Other Matter Paragraph will always reached after Opinion paragraph ? ? ?
Hello sir, Thanks for this great lecture I have 2 questions to ask. 1). On what basis do we actually conclude that the matter being material is PERVASIVE ? therefore to issue a modified report with adverse /disclaimer opinion?
2). When the directors are unable to assess the going concern of the business (for perfectly innocent reasons) what course of action would the auditor take? can he help them out do it ? or simply give an adverse opinion? .
I would like you to plz shed some light on these questions. My apologies if i am not supposed to use this forum to ask questions
Yes. It’s really that when the misstatements get very large indeed (pervasive) that they have suxh a devastating effect on the FS that an adverse opinin might be better.
I have one issue that needs an explanation. When we have a Qualified Opinion Except for the material misstatement is an isolated effect we can pin point the exact area.
But when we have Adverse Opinion we can also pin point the the misstatement such as the bad debt provision that was not provided for, the 2 mil that would not be recoverable.
My question is if we can pin point the error, the size or amount of the error that makes us use Except for or Adverse Opinion. Please clarify. Thanks Much.
ushmita says
Thank you very much for simplifying this chapter.
ilievas says
Hi there,
I always thought that when the item is material we have a modified opinion.
However, when I was doing some exercises I stumbled upon the following terminology which got me pretty confused “non-adjusting material events” and it was regarding matters after the BS date.
Now how do I know when the question regarding audit reporting comes – do we modify the report or not when there are material issues after BS date?
Thank you in advance for the clarification
Kim Smith says
See in Chapter 26 of the notes – material non-adjusted events are required to be DISCLOSED (IAS 10). If not disclosed, the financial statements would indeed be modified (“except for”) due to material misstatement. Please post any further technical questions to my forum https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-audit-and-assurance-aa-exams
nini234 says
Sir if we have EOM and MURGC then will MURGC will come first or EOM. Thanks
Kim Smith says
See s.3 in Chapter 5 where the elements are listed and the order explained. MURGC before KAM(if relevant)/EoM(if any).
Order of KAM/EoM depends on the auditor’s judgment of relative importance. Please remember to use the FORUM (which is where I answer technical questions every dat) https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-audit-and-assurance-aa-exams for questions rather than here (which is for comments).
tugcem says
Hi Sir,
Thank you so much for this great lectures. I have a question about going concern issues.
If directors have prepared the accounts on break-up basis do we still include material uncertainty paragraph in the auditor’s report or we only include EoM paragraph?
Thank you
salman115 says
Sir thank you for the lecture
sunny20 says
Hi Ken,
Qualifed opinion is not modified. So can I say Unmodified audit report with qualified opinion?
Many thanks in advance.
Kim Smith says
In technical terms, “modified” refers to the audit opinion. An audit opinion is either unmodified or modified. If it’s modified that means qualified, except for or adverse.
sulemanali93 says
Thank you for the wonderful lectures!
Please confirm whether in qualified report, the basis of qualified opinion paragraph comes before the qualified opinion paragraph?
Ken Garrett says
It comes after the opinion paragraph (see chapter 5 notes and lectures)
Thanks for your thanks.
nbhushan says
Is there any free website like this for CMA course which provides lectures?
Ken Garrett says
CMA? If you mean CIMA, we provide free lectures and materials on this site.
nbhushan says
No Certified Management Accounting
Ken Garrett says
I don’t know of one.
omz2010 says
I still need some clarification please regarding Going Concern.
I don’t understand why there is a separate paragraph for ‘Material Uncertainty relating to Going Concern’ but then it also has to be disclosed in the ‘Emphasis of Matter Paragraph’
Also, how can Material Uncertainty relating to Going Concern not affect the auditor’s opinion if not adequately disclosed which is what is shown on the diagram on the first page of the lecture notes, and described in the lecture itself.
Many thanks for your help in advance.
Ken Garrett says
We need to update this lecture.
If there is a meterial uncertainty as to going concern paragraph, then this is not repeated in an EoM para.
If a material uncertainty as to going concern is properly disclosed in the FS then the audit opinion is not affected, though the audit report is affected by adding the material uncertainty a out going concern paragraph.
See here:
https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/auditor-report.html
hmohamed says
When we have EOM and going concern, do we add 2 paragraphs after the opinion? Or 1 paragraph which explains both matters should work in this case?
Ken Garrett says
Now there is a special paragraph added after the opinion paragraph if there is material uncertainty about going concern. It operates like and EoM, but has a different title.
If there is a need for and EoM as well (for example like above when there is a law case) there would be two paragraphs: EoM and material uncertainty about goving concern
adilsiddiqui says
Respected sir,
I have Following Question Will you please guideline Me
1-Emphasis of Matter Paragraph will be included before Opinion paragraph for better understanding of user Entity if Report is Qualified is it ”OK”
2-Emphasis of Matter Paragraph will reached Always Before Opinion Paragraph ???
3- Other Matter Paragraph will always reached after Opinion paragraph ? ? ?
Regards:
Adil Siddqiui
Ken Garrett says
EOM is always after the opinion paragraph.
jojiaj says
what is the difference between qualified report and modified report ?
thanks
Ken Garrett says
Listen the lecture again.
lucie13 says
Very good answer ?
Kate says
Hello Sirs, Thank you so much for your lecture.
Kindly help to confirm whether my understanding is right or not!
Unqualified report is when the financial statement give a true and fair view of FS in all material respect without any emphasis of matter paragraphs
when the audit report has a emphasis of matter paragraphs –>it should be a unqualified opinion, not unqualified report, is it?
Thank you!
smooth says
Hello sir, Thanks for this great lecture
I have 2 questions to ask. 1). On what basis do we actually conclude that the matter being material is PERVASIVE ? therefore to issue a modified report with adverse /disclaimer opinion?
2). When the directors are unable to assess the going concern of the business (for perfectly innocent reasons) what course of action would the auditor take? can he help them out do it ? or simply give an adverse opinion? .
I would like you to plz shed some light on these questions. My apologies if i am not supposed to use this forum to ask questions
Ken Garrett says
Yes. It’s really that when the misstatements get very large indeed (pervasive) that they have suxh a devastating effect on the FS that an adverse opinin might be better.
tricia says
I have one issue that needs an explanation. When we have a Qualified Opinion Except for the material misstatement is an isolated effect we can pin point the exact area.
But when we have Adverse Opinion we can also pin point the the misstatement such as the bad debt provision that was not provided for, the 2 mil that would not be recoverable.
My question is if we can pin point the error, the size or amount of the error that makes us use Except for or Adverse Opinion. Please clarify. Thanks Much.
tricia says
Thanks for the clarification.