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Hello. Just want to claify something.
Company is being sued for £40 m. Audit evidence and written correspondence from company lawyers conclude that its possible for claim to be successful but NOT probable.
Company cash is only £3 m and claim amoumt is 178% of profit before tax.
Answer in book suggests that we should use emphasis of matter paragraph as treatment is correct and discloure is given in FS however inline with new report should we not use Material Uncertainty Related To Going Concern.
Answer is probably old but just want to clarify ( Darren 6/15 BPP)Thanks
Paragraph 22 of ISA 570 (revised) states:
“Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists
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: (Ref: Para. A28–A31, A34)
(a) draw attention to the note in the financial statements that discloses the matters set out; 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.”
So you’re correct – the use of an Emphasis of Matter paragraph is no longer acceptable
OK?
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