Page 34 - Inspection Report 2018

In addition to the common findings, the AOB observed instances where Going Concern was included as
a KAM. However, there was no disclosure on MUGC included in the auditor’s report. Based on the AOB’s
engagements with the relevant auditors, it was noted that sufficient appropriate evidence were obtained from
the management to support the going concern assumption, including but not limited to feasible business
plans, positive projected cash flows and availability of financial support for the next business cycle. Auditors
should avoid any ambiguity by tailoring their disclosures as specific as possible, particularly where a MUGC
disclosure was deemed not required.

Although there are no specific requirements that mandates consultations, it is common to see audit firms
requiring mandatory consultations in circumstances where there is a possibility of issuing modified opinions. In
circumstances where the auditors decided to include Going Concern as a KAM without the inclusion of MUGC
disclosures in the auditor’s report, the AOB noted that certain auditors initiated consultation with the Firm’s
risk management team before issuing the audit opinion. The AOB views this as a best practice that should be
considered by audit firms when faced with similar situations.

Further, as with other significant audit areas communicated with TCWG, it is also equally important for audit
firms to communicate clearly and in a timely manner to TCWG on this area.

Moving Forward …

In dealing with potential going concern issues, audit firms should take extra caution in ensuring sufficient
audit procedures were performed towards finalising the audited financial statements and in issuing the
audit opinion. This includes the following:

• Ensuring that sufficient disclosures have been made by management on the appropriateness of
the going concern assumptions;

• Consulting with the audit firm’s risk management team whenever Going Concern is a risk area
regardless of whether it is disclosed as a KAM, MUGC or leads to a modification; and

• Timely communication with TCWG who are ultimately responsible for the financial statements of
the entity.

AUDIT OVERSIGHT BOARD
32 ANNUAL INSPECTION REPORT 2018

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