Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Undisclosed going concern
- This topic has 5 replies, 3 voices, and was last updated 5 years ago by Kim Smith.
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- March 1, 2019 at 1:28 pm #506984
Hi,
If I notice that a material going concern issue was not disclosed, am I correct using the following treatment: “ disclose this in uncertainty relarting to Going Concern paragraph in the audit report and then issuing a qualified audit opinion”?
If I am wrong, what is the right treatment ?
March 1, 2019 at 2:02 pm #506990You are wrong. Please see Chapter 24 of the notes. The MURGC para can only ever be used when a MURGC is ADEQUATELY disclosed.
As is stated on page 117 “If the notes do NOT disclose the going concern uncertainty, the auditor must express a modified opinion …”As a general rule – anything reported in the auditor’s report features in only ONE place – so either:
If disclosure adequate … MURGC (refers to disclosure note) …. (has no affect on opinion)
Or
If disclosure is inadequate … modified opinion.March 2, 2019 at 5:26 am #507075If going concern assumption inappropriate but management disclosure treatment adequate than auditor give unmodified opinion .So in above situation MURGC would be add in audit report or not ?
March 2, 2019 at 7:38 am #507091NO! No amount of disclosure (about anything) can ever make up for the wrong accounting treatment.
Consider for example – a company’s major customer with a balance of $40m goes into liquidation after the year end. A note referenced to the total amount of receivables in the SoFP states that this includes “a balance of $40m due for [customer], which went into liquidation on [date]. This balance is expected to be irrecoverable and will be written off in the [next accounting period].”
The audit opinion would have to be qualified “except for” failure to recognise the credit loss in the current year.March 2, 2019 at 8:16 am #507101Thanks very much to clear this point .
March 2, 2019 at 8:26 am #507106You’re welcome!
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