Becker AUD – substantial doubt on going concern question

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  • #837310
    lk
    Participant

    From what i understand and according to Becker book texts,

    significant doubt about going concern –> disclaimer of opinion
    substantial doubt on going concern –> unmodified opinion with E-o-M paragraph

    so i selected d. what the hell. it’s b. any more consistent idea on substantial doubt on going concern reporting?

    Questoin:
    An auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. If the entity’s disclosures concerning this matter are adequate, the audit report may include a(an):
    Disclaimer of opinion “Except for” qualified opinion
    a.Yes Yes
    b.Yes No
    c.No Yes
    d.No No

    Becker Explanation
    Choice “b” is correct. Yes – No.
    If an auditor concludes that there is substantial doubt about an entity’s ability to continue as a going concern and that the entity’s disclosures are adequate, then the audit report may be either:
    Unmodified with emphasis-of-matter paragraph, or
    Disclaimed.
    (Generally, an unmodified opinion is issued, but the auditor is not prohibited from choosing to issue a disclaimer.)
    Choice “a” is incorrect. An “except for” qualified opinion would be appropriate if the entity’s disclosures were inadequate.
    Choice “d” is incorrect. While an unmodified opinion is generally issued, the auditor is not prohibited from choosing to issue a disclaimer; for example, in areas involving a high degree of uncertainty.
    Choice “c” is incorrect, based on the explanation above.

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  • #837379
    aatoural
    Participant

    Basically just add to your note that, regardles of the fact that the going concern issue was apprpriatedly disclosed in the notes. It is always up to auditor's judgement call to decide to leave it as unmodified, or regardles desclaim an opinion. But NEVER an except for opinion. That is how BEcker lecture explains it as well., bit tricky but always have in mind that auditor judgement plays an important role in auditing.

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    #837382
    Anonymous
    Inactive

    This may provide some more information:
    https://pcaobus.org/Standards/Auditing/Pages/AU341.aspx

    I think that “substantial” and “significant” are equivalent terms in this discussion, so rather than it being “one term has one result and the other has the other result”, both terms can have either result. The determination of which result is left up to the auditor. The only thing which would make only one result an option would make an unmodified with e-o-m not an option would be if it's not adequately disclosed, in which case qualified is required.

    #838291
    lk
    Participant

    thanks guys. seems like that substantial vs significant thing really is very subjective. i need more practice on these MCQ.

    thanks again.

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