Page 169 - CA Final PARAM Digital Book.

Thus, the contention of Mr. Vishay is not proper as matters that do not link with the matters disclosed
in the financial statements can also be considered as a key audit matter if it required significant
attention of the auditor which had an impact on its audit.

QNO Reporting of Key Audit Matters Old Course – (N18M, M18E, M19M, M20M, N20E)
112.200 TITANIUM CNO— Unique

Toddle Limited had definite plan of its business being closed within a short period from the close of the
accounting year ended on 31st March 2017. The Financial Statements for the year ended 31/03/2017 ' had
been prepared on the same basis as it had been in earlier periods with an additional note that the
business of the Company shall cease in near future and the assets-shall be disposed off in
accordance with a plan of disposal as decided by the Management. The Statutory Auditors of the
Company indicated this aspect in Key Audit Matters only by a reference as to a possible cessation of
business and making of adjustments, if any, thereto to be made at the time of cessation only. Comment
on the reporting by the Statutory Auditor as above.
OR
TBR Limited has plan of its business being closed due to huge loss incurred due to the recent outbreak of
global pandemic, within a short period from the close of the accounting year ended on 31st March 2020.
The Financial Statements for the said year have been prepared on the same basis as in earlier periods with
an additional note that the business of the Company shall cease in near future and the assets shall be
disposed off in accordance with a plan of disposal as decided by the Management. The Statutory Auditors
of the Company indicated this aspect in Key Audit Matters only by a reference as to a possible cessation
of business and making of adjustments, if any, to be made at the time of cessation only. Comment on the
reporting by the Statutory Auditor as above.
Answer Part I -- Relevant Standards & Laws
▪ SA 701 – Communicating Key Audit Matters in the Independent Auditor’s Report

▪ SA 570– “Going Concern”,
Part II -- Requirements of Relevant Standards & Laws
➢ SA 570 “Going Concern”
As per SA 570 “Going Concern”, management intentions to liquidate the entity or to cease
operations is one of the event or condition that may cast significant doubt on the entity’s ability to
continue as going concern.

As per SA 570, if events or conditions have been identified that may cast significant doubt on the
entity’s ability to continue as a going concern but, based on the audit evidence obtained the
auditor concludes that no material uncertainty exists, the auditor shall evaluate whether, in
view of the requirements of the applicable financial reporting framework, the financial statements
provide adequate disclosures about these events or conditions Even when no material
uncertainty exists, it requires the auditor to evaluate whether, in view of the requirements
of the applicable financial reporting framework, the financial statements provide adequate
disclosure about events or conditions that may cast significant doubt on the entity’s ability
to continue as a going concern.

➢ SA 701 “Communicating Key Audit Matters in the Independent Auditor’s Report”
Further, as per SA 701 “Communicating Key Audit Matters in the Independent Auditor’s Report”,
when matters relating to going concern may be determined to be key audit matters and explains
that a material uncertainty related to events or conditions that may cast significant doubt on the
entity’s ability to continue as a going concern is, by its nature, a key audit matter. SA 701 also
emphasizes on auditor’s responsibility to communicate key audit matters in the auditor’s report.

Part III -- Facts
➢ As per the facts given in the case, intention of the Toddle Limited had definite plan of its business
being closed down within short period from 31 March 2017. However, financial statements for the
year ended 31.03.2017 had been prepared on the same basis as it had been in earlier periods with
an additional note.

Part IV -- Conclusion
➢ Thus, management intentions to liquidate the entity or to cease operations is one of the event or
condition that may cast significant doubt on the entity’s ability to continue as going concern is a key
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