Sir At page 101 of param v1 there is ques
There is pending legal proceeding which cast significant doubt on the going concern
And existence of above condition signify that material uncertainty exist
And there is point regarding Going concern reporting. That adverse opinion to be given irrespective of disclosure in FSt.
Why mere disclosure is Considered Enough
And use of going concern assumption presumed appropriate even where
There is significant doubt on going concern and material uncertainity exist.
If going concern is inappropriate following will get applicable.
Para 21 and A26 explains what happens generally in majority of cases. But A27 explains what if management goes for liquidation basis.
Implications for the Auditor’s Report
Use of Going Concern Basis of Accounting is Inappropriate
21. If the financial statements have been prepared using the going concern basis of accounting but, in the auditor’s judgment, management’s use of the going concern basis of accounting in the preparation of the financial statements is inappropriate, the auditor shall express an adverse opinion. (Ref: Para. A26–A27)
Further Explanation in A26-A27
Use of Going Concern Basis of Accounting is Inappropriate (Ref: Para. 21)
A26. If the financial statements have been prepared using the going concern basis of accounting but, in the auditor’s judgment, management’s use of the going concern basis of accounting in the financial statements is inappropriate, the requirement in paragraph 21 for the auditor to express an adverse opinion applies regardless of whether or not the financial statements include disclosure of the inappropriateness of management’s use of the going concern basis of accounting.
A27. When the use of the going concern basis of accounting is not appropriate in the circumstances, management may be required, or may elect, to prepare the financial statements on another basis (e.g., liquidation basis). The auditor may be able to perform an audit of those financial statements provided that the auditor determines that the other basis of accounting is acceptable in the circumstances. The auditor may be able to express an unmodified opinion on those financial statements, provided there is adequate disclosure therein about the basis of accounting on which the financial statements are prepared, but may consider it appropriate or necessary to include an Emphasis of Matter paragraph in accordance with SA 706 (Revised)11 in the auditor’s report to draw the user’s attention to that alternative basis of accounting and the reasons for its use.