John Selwood says considerations relating to support from group companies are presenting auditors with plenty to think about.
Volatility caused by Brexit and the pandemic is creating challenging times for auditors regarding support from group companies and potential going concern issues. This is raising questions around, for example: ‘letters of support’; evaluating and reporting on management’s going concern assessments; obtaining sufficient appropriate audit evidence; whether to include a material uncertainty paragraph; an emphasis of matter paragraph; how best to word these; where in the audit report to locate them – and more.
Let’s assume that the audited entity has adequately disclosed all of this in the form of a good post-balance sheet events note and disclosure of the parent’s support. Let’s also assume that you have obtained all the audit evidence that you require to support this. Therefore, your audit opinion will be unmodified in this regard.
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