ExpertACCA · Question 08 · Review and Reporting
SECTION A - CASE 2: GREENYIELD AGRI-COOP
GreenYield Agri-Coop is a large agricultural cooperative. You are the audit senior for the year ended 30 September 20X5.
During the audit, you note the following:
- A severe, unprecedented drought during the summer of 20X5 has decimated crop yields, raising significant going concern issues.
- On 15 November 20X5, a major customer of GreenYield, who owed $1.2m at the year-end, declared bankruptcy due to a fraud discovered in October 20X5.
- Management has prepared cash flow forecasts for 12 months from the date of approval of the financial statements, showing a severe cash shortage unless a bank loan is renegotiated.
- Management refuses to provide a written representation confirming their assessment of the cooperative's ability to continue as a going concern.
Question:
Assume management successfully renegotiates the bank loan, but a material uncertainty regarding going concern still exists. Management has adequately disclosed this material uncertainty in the financial statements. What is the impact on the auditor's report?
SECTION A - CASE 2: GREENYIELD AGRI-COOP
GreenYield Agri-Coop is a large agricultural cooperative. You are the audit senior for the year ended 30 September 20X5.
During the audit, you note the following:
- A severe, unprecedented drought during the summer of 20X5 has decimated crop yields, raising significant going concern issues.
- On 15 November 20X5, a major customer of GreenYield, who owed $1.2m at the year-end, declared bankruptcy due to a fraud discovered in October 20X5.
- Management has prepared cash flow forecasts for 12 months from the date of approval of the financial statements, showing a severe cash shortage unless a bank loan is renegotiated.
- Management refuses to provide a written representation confirming their assessment of the cooperative's ability to continue as a going concern.
Question:
Assume management successfully renegotiates the bank loan, but a material uncertainty regarding going concern still exists. Management has adequately disclosed this material uncertainty in the financial statements. What is the impact on the auditor's report?
Answer options:
Qualified opinion due to a material misstatement.
Unmodified opinion with an Emphasis of Matter paragraph.
Unmodified opinion with a 'Material Uncertainty Related to Going Concern' section.
Adverse opinion as the company may not survive.
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