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December 2018 Q2(c)
Explain the possible reasons why the directors may wish to exclude these disclosures and evaluate the possible implications for the auditor’s report.on the model answers the examiner spit the implications for the auditor’s report into 1. material but not pervasive and, 2. material and pervasive.
is it ok if we conclude that matter is is material and not pervasive.
Short answer – yes as long as you at least considered alternative(s).
The Q was “Evaluate the possible reasons why …. and possible implications ….” (6 marks) – so you need to make only 6 relevant points – 1 of which would be for a reasoned conclusion. If you look at the marking scheme you couldn’t get full marks for considering only one implication for the auditor’s report – to make a full evaluation you must at least consider alternative(s).
In accordance with ISA 570 I would conclude material and NOT pervasive – the audit opinion will be “except for [disclosure omitted[” – to be adverse, the auditor would have to be of the opinion that the financial statements should not have been prepared on a going concern basis – which is clearly not the case here.
Clear now.
but instead of asking possible implications, what if the examiner asks just for the implications.another question.
What is difference between modified audit report and modified audit opinion.?and what makes the audit report to be modified?
I think in this Q it has to be “possible implications” because you don’t know what is the directors’ reason – if you knew the reason perhaps there would be only one course of action/implication
In short – the terms modified/unmodified should be used ONLY to describe the audit OPINION (page 120 of our notes) – there is no such thing as a modified/unmodified report and you must not use this term in AAA
I give an explanation here (as it still of course of confusion, even though it should have been put right in ACCA materials since 2016) https://opentuition.com/topic/reporting-8
December 2013 Q5
Having completed the file review, you have concluded that the use of the going concern assumption is appropriate, but that there is significant doubt over Burford Co’s ability to continue as a going concern.The audit committee is reluctant to include a detailed note to the financial statements, but have agreed that a brief note will be included.
MY question. what is the implication for the auditor’s report if the auditor concludes that the brief note is sufficient.
Examiner Answer
– No modification of auditor’s opinion
– Emphasis of Matter paragraph to be includedMy Answer
– No modification of auditor’s opinion
– Going concern paragraph to be included in the auditor’s report.You have to be very careful looking at old Qs concerning auditor’s reports – MURGC “replaced EoM” with regard to material uncertainty since 2016. If you have a current exam kit the answer should have been technically updated.
This is why we recommend that all candidates have current edition kits from Approved content providers – because ACCA requires them to the technically up-to-date and of exam style and standard.
AAA was introduced from September 2018 and is not the same as P7 – I recommend you focus on the 8 exam’s worth of AAA Qs available in the CBE practice platform.
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