If the auditors decide to issue a modified auditor's report due to doubt about an entity's ability to continue as a going concern _______.
A)the report should always be adverse
B)the report should always be a disclaimer of opinion
C)the matter should be communicated with those charged with governance
D)the should be communicated to the client's legal counsel for disclosure to senior management

Question

Quizplus · Accepted Answer

When the auditors have doubts about the entity's ability to continue as a going concern, they should communicate this matter with those charged with governance, such as the board of directors or audit committee. The auditors may also issue a modified auditor's report, but the nature of the modification will depend on the extent of their doubt and the impact on the financial statements. The report could be either a qualified opinion or an adverse opinion, depending on the severity of the situation. Alternatively, the auditors may issue a disclaimer of opinion if they are unable to obtain sufficient evidence or information to form an opinion. However, regardless of the type of report issued, it is important to communicate the matter with those charged with governance to ensure appropriate action is taken. The auditors are not required to communicate the matter with the client's legal counsel for disclosure to senior management as this is the responsibility of those charged with governance.

If the Auditors Decide to Issue a Modified Auditor's Report