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15. Management of ECX Systems Limited acknowledged that going concern assumption will not be suitable while preparing financial statements and informs the auditor that the fact of uncertainty related to going concern would suitably be disclosed in the notes of accounts. How should the auditor address this while preparing Independent Auditor's Report? AUDITING AND ETHICS

Options

ATo include a separate section under the heading "Material uncertainty related to Going Concern" in the auditor's report as per the requirement of SA 570.
BTo include a separate section under the heading "Key Audit Matters" in the auditor's report as per the requirement of SA 701.
CTo include a sub section under the heading "Material uncertainty related to Going Concern" under separate section of "Key Audit Matters" in the auditor's report as per the requirement of SA 705.
DTo include a separate section under the heading "Key Audit Matters" in the auditor's report as per the requirement of SA 570. (2 Marks) Answer Key MCQ No. Correct Option
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Correct Answer

Option ATo include a separate section under the heading "Material uncertainty related to Going Concern" in the auditor's report as per the requirement of SA 570.

All Options:

  • ATo include a separate section under the heading "Material uncertainty related to Going Concern" in the auditor's report as per the requirement of SA 570.
  • BTo include a separate section under the heading "Key Audit Matters" in the auditor's report as per the requirement of SA 701.
  • CTo include a sub section under the heading "Material uncertainty related to Going Concern" under separate section of "Key Audit Matters" in the auditor's report as per the requirement of SA 705.
  • DTo include a separate section under the heading "Key Audit Matters" in the auditor's report as per the requirement of SA 570. (2 Marks) Answer Key MCQ No. Correct Option

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Detailed Solution & Explanation

Correct Answer: Option **A**

Explanation:
Under SA 570 (Revised), "Going Concern":
If the auditor concludes that the use of the going concern basis of accounting is appropriate but a material uncertainty exists regarding the entity's ability to continue as a going concern, the auditor must check if the disclosure of this uncertainty in the notes to the accounts is adequate.

If the disclosure is adequate, the auditor shall express an unmodified opinion and include a separate section under the heading **"Material uncertainty related to Going Concern"** in the auditor's report to:
1. Draw attention to the note in the financial statements that discloses these matters; and
2. 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.

Thus, the auditor should address this by including a separate section under the heading "Material uncertainty related to Going Concern" in the auditor's report as per SA 570.

Hence, **Option A** is the correct answer.

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