ACCA · Question 13 · Review and reporting
CASE 3: AQUAGRID UTILITIES PLC
AquaGrid Utilities PLC is a listed public water utility company. The audit for the year ended 31 March 2026 is nearing completion. In April 2026, a major water main burst, causing significant flooding and resulting in a pending lawsuit against AquaGrid. Furthermore, the company is struggling to meet its debt covenants due to a regulatory cap on water tariffs. The audit partner is reviewing the draft financial statements and considering the implications for the auditor's report.
Assume the auditor concludes that a material uncertainty exists related to going concern (due to the debt covenants), but management has adequately disclosed this in the financial statements. What is the impact on the auditor's report?
Answer options:
A qualified 'except for' opinion is issued due to the material uncertainty.
An adverse opinion is issued because the company may not survive.
An unmodified opinion is issued, and an Emphasis of Matter paragraph is added.
An unmodified opinion is issued, and a separate section headed 'Material Uncertainty Related to Going Concern' is included.
18 questions · hints · full answers · grading
Expert