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good day Sir
i am trying to come to grips with qualifications relating to material uncertainty on going concern.
i read this paragraph fro the technical article
‘If the directors do not make adequate disclosure of the material uncertainty, the auditor must express an adverse opinion. An adverse opinion states that the financial statements do not present fairly (or give a true and fair view). This opinion will be expressed regardless of whether or not the financial statements include disclosure of the inappropriateness of management’s use of the going concern assumption.’
if use of going concern is inappropriate does it matter if the fact is disclosed.i ask because the paragraph starts by saying if director do not make……
Going concern issues have three levels
1 All’s well. Directors have reviewed GC, auditors have audited there review and all agree there is no uncertainty. No disclosure in notes is needed. No special paragraph in audit report.
2 Material uncertainty about GC. This does not mean the company is doomed, there is just black cloud. FS should be produced on a GC basis, but there needs to be disclosure in the notes and the special paragraph (material uncertainty on going concern). If the directors do not make the proper disclosure then an adverse opinion is needed.
3 The company appears doomed (ie, no realistic prospect of survival). The FS should be drawn up on a break-up basis. Disclosure about the imminent collapse should be made in the notes. If full disclosures are made and the auditor agrees with the accounting approach used (break-up) the opinion will be unmodified.