ProForce Inc.is facing a large lawsuit from its employees.The contingency is significant and may lead to a going concern issue if ProForce is found guilty.ProForce took the adequate measures,as prescribed by IFRS (International Financial Reporting Standards),to account,disclose,and present the contingency in the financial statements.The auditor should
A)add a section in the audit report titled "Material Uncertainty Related to Going Concern" after the opinion paragraph.
B)issue an unmodified report with no extra sections.
C)issue a modified report.
D)deny an audit opinion.

Question

Quizplus · Accepted Answer

The best choice is for the auditor to add a section in the audit report titled "Material Uncertainty Related to Going Concern" after the opinion paragraph. This is because the contingency ProForce is facing may lead to a going concern issue if they are found guilty. As per ISA 570, the auditor's report should include a separate section indicating a "Material Uncertainty Related to Going Concern" arising from events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. This section will help to provide transparency and improve the users' understanding of the financial statements.