[Anonymous]

After considering management’s plans, an auditor concludes that there is substantial doubt about a client’s ability to continue as a going concern for a reasonable period of time. The auditor’s responsibility includes:

A.

disclaiming an opinion on the financial statements due to the indications of possible financial difficulties.

B.

indicating to the client’s audit committee whether management’s plans for dealing with the adverse effects of the financial difficulties can be effectively implemented.

C.

considering the adequacy of disclosure about the client’s possible inability to continue as a going concern.

D.

issuing a qualified or adverse opinion, depending upon materiality, due to the possible effects on the financial statements.

Answer C. When, after considering management’s plans, the auditor concludes there is a substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, the auditor should consider the possible effects on the financial statements and the adequacy of the related disclosures. If, after considering identified conditions and events and management’s plans, the auditor concludes that substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time remains, the audit report should include an emphasis-of-matter paragraph (following the opinion paragraph) to reflect that conclusion.

The auditor need not issue a qualified, adverse, or disclaimer of opinion. The auditor also need not communicate with the client’s audit committee regarding whether management’s plans for dealing with the adverse effects can be effectively implemented.

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The explanation says “the auditor need not issue a qualified, adverse, or disclaimer of opinion”, but isn’t that wrong, since you have to issue a disclaimer of opinion if there is doubt for going concern?

[AJG38]

You don't “have” to issue a disclaimer when there is doubt of about an entities ability to continue as a going concern. Depending on the adequacy of disclosures you could issue an unmodified opinion, the only need in this situation is an emphasis of matter paragraph with the phrase “substantial doubt” and “going concern.”

AUD - 91
BEC - 87
FAR - 82
REG - 81

All passed in Q2 and Q3 2015
Licensed since September 2016

AUD - 91 (4/7/2015)
BEC - 88 (4/29/2015)
FAR - 80 (5/29/2015)
REG - 70 (8/18/2015); 82 (11/08/2015)

Gleim & Ninja Flashcards

[acamp]

I think of disclaimer along the lines of their being a scope issue, independence issue, etc.

A going concern problem does not suggest that anything is wrong with the financials, simply that there is something wrong with the business itself and it may not be around in 12 months from the audit report date. Choice C sounds correct, as to keep the financials correct management needs properly disclosure the going concern issue (usually in a footnote) and the auditor will add a paragraph to the otherwise unqualified opinion.

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[Anonymous]

Going concern is GAAP issue, not GAAS issue.

[trish_1234]

Hey so we had a debate on this in AUD forum

the auditor issues an unmodified opinion if the disclosure is adequate, however, the auditor is not precluded from disclaiming an opinion for going concern …..Moreover, the auditor only issues and modified opinion if the disclosure is inadequate…

This is what gleim says….

AUD 69, 92 7/15 Gleim and Ninja test bank
FAR sometime in 10/15 Gleim
BEC not taken
REG not taken

[Author]

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