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If a company defaults on its loan and mentions it in the notes, do we need to qualify our audit opinion or mention it in the audit report at all?
Please see from page 38 of the notes.
If default meant that the company was no longer a going concern but the financial statements are drawn up on a going concern basis that would merit an adverse opinion (see s.9 on page 43) – no amount of disclosure could “make up” for having used a wrong basis.
See s.4 on page 40: If the notes adequately disclose not only the default but “what is management doing about it?” (i.e. why is there material uncertainty) – there will be MURGC.
If disclosure is not adequate, opinion must be qualified.Thank you so much. This is related to my practice and I just wanted to know whether it would be fair on me to be posting questions here as it increases your work load, although I have been a former student and currently a member of Acca thanks to OpenTuition.
And responding to your reply, what if there is no material uncertainty, I disclose the matter in the notes in detail, do I still put an except for qualification?
I am not a consultant to advise on practice but your scenario makes no sense. If there is not material uncertainty there is no disclosure for the company to make in the notes to the financial statements. There is therefore no “mention” for the auditor to make in an auditor’s report.
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