Acca aaa s21 Notes

3. Audit work on going concern uncertainty
This can consist of:
๏
Evaluating management’s plans for future actions in relation to its going concern and whether 
the outcome of these plans are feasible and likely to improve the situation.
๏
Where the entity has prepared a cash flow forecast:
‣
Evaluating the reliability of the underlying data generated to prepare the forecast; and 
‣
Determining whether there is adequate support for the assumptions underlying the forecast. 
๏
Considering whether any additional facts or information have become available since the date 
on which management made its assessment. 
๏
Requesting written representations from management and, where appropriate, those charged 
with governance, regarding their plans for future actions and the feasibility of these plans. 
September 2021 to June 2022 exams
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4. Interaction between KAMs, MURGC and EoM
๏
Inevitably, if there are going concern doubts then dealing with these will have been a key audit 
matter for the auditor, but it is very important to realise that going concern issues are reported 
only ONCE in the auditor’s report. The rules are:
‣
If the auditor concludes that there is material uncertainty with regard to going concern which 
is 
adequately
disclosed, a MURGC section must be included in the auditor’s report but will 
NOT be referred to again in the KAM section.
‣
If the auditor had been worried about going concern but concludes that in fact, no material 
uncertainty exists , there will clearly be no MURGC section, but it may be included as a KAM, if 
it meets the definition of a KAM.
๏
If what is regarded as a key audit matter is disclosed in the notes to the financial statements, the 
KAM does not need to repeat that information but must refer to the relevant note.
๏
If an item is communicated in the KAM paragraph, the auditor does not also include it in an EoM 
paragraph.
Remember:
A KAM is a key AUDIT matter. So it is possible that there could be some matter 
which is fundamental to users’ understanding of the financial statements, which was not a KAM.
In this case, an EoM paragraph refers the user to an issue that is 
adequately
disclosed in the 
financial statements. (If not adequately disclosed, the audit opinion must be qualified.)
Here is an example of an emphasis of matter:
We draw attention to Note 27 to the financial statements, which describes the effects of a fire in 
the Company's warehouse. Our opinion is not modified in respect of this matter.
Note that the financial statements do contain a note explaining the effects of the fire. The financial 
statements are therefore as comprehensive and as open as they can be. But obviously, the fire has 
operational and financial implications and to understand the company's position (e.g. its ability to pay 
dividends next year), the users of the financial statements need to be aware of this.
5. Conclusion
This is easy: matters that might give rise to a KAM, a material uncertainty as to going concern or to an 
emphasis of matter paragraph appear once and once only in any auditor’s report.