Question

Client has breached debt covenants; lender issued waiver

Q: Answer-Client has breached debt covenants; lender issued waiver valid for 9 months after balance sheet date...

SA 570 requires auditor to evaluate going concern for at least 12 months. Waiver for 9 months leaves uncertainty. With no formal support, a material uncertainty exists adequate disclosure a separate paragraph is required, not adversedisclaimer unless disclosures inadequate.

valid for 9 months after balance sheet date. Auditor notes liquidity support from group company but no formal commitment. What should auditor conclude?

A No going concern issue; waiver suffices.

B Material uncertainty exists; include separate “Material Uncertainty Related to Going Concern” paragraph.

C Adverse opinion required.

D Disclaimer of opinion required.

E No disclosure if waiver covers 9 months.

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Client has breached debt covenants; lender issued waiver

Solution