Page 124 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
(CNO-SA570.060) Step 3: -Conclusion & Reporting
PART 1 – Conclusion about Material Uncertainty.
After collecting SAAE, auditor determines if there is MATERIAL UNCERTAINTY regarding events or
conditions that raise significant doubt about the entity's going concern status.
Material Uncertainty: A material uncertainty exists when the magnitude of its potential impact and
likelihood of occurrence is such that, in the auditor's judgement, appropriate disclosure of the nature and
implications of the uncertainty is necessary.
Events & Conditions & Material Uncertainty Exists: Auditor shall determine whether financial statements
adequately disclose.
o Principal Events & Conditions
o Disclose clearly that there is Material Uncertainty regarding going concern and it may not be able to realise
assets & discharge liabilities in normal course of business.
Events & Conditions Exists & But No Material Uncertainty: Auditor shall determine whether financial
statements adequately disclose.
o Principal Events & Conditions as per requirements of FRF
PART 2 - After concluding about Material Uncertainty & its treatment, auditor should evaluate about going
concern and its implications on audit report
Going Concern Appropriate but whether material uncertainty exists?
• If MU doesn't exists- Express Unmodified Opinion
• If MU exists and disclosure is adequate
▪ Yes: - Then express unmodified opinion BUT a separate section MATERIAL UNCERTAINTY RELATED
TO GOING CONCERN to be included in audit report.
o Refer to note in financial statement.
o Express that they cast significant doubt over going concern but opinion in not modified
▪ No: - Then express qualified or adverse opinion as appropriate and in basis of para, explain that disclosure
was not adequate
Going Concern inappropriate: But management still uses going concern assumption as base, then auditor
shall give ADVERSE opinion
Going Concern is Doubtful and Management is not willing to extend its Assessment: Auditor may qualify
or give disclaimer as appropriate.

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SA 580

WRITTEN REPRESENTATIONS

(CNO-SA580.020) Written Representation

Definition
Confirmation: A written representation is a statement by management given to the auditor to confirm certain
matters or support other audit evidence, such as commitments made at the start of the audit or to corroborate
information provided orally.
Enhances Quality of Information From Management
Enhancement: A request for written representations from management, rather than oral, may lead to more
rigorous consideration, thereby enhancing the quality of the representations.
Excludes
Exclusion: Written representations do not include financial statements, assertions therein, or supporting books
and records. In the context of this SA, "management" refers to both management and, where appropriate, those
charged with governance.

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