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    Question

    Client has breached debt covenants; lender issued waiver

    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. Correct Answer Incorrect Answer
    B Material uncertainty exists; include separate ā€œMaterial Uncertainty Related to Going Concernā€ paragraph. Correct Answer Incorrect Answer
    C Adverse opinion required. Correct Answer Incorrect Answer
    D Disclaimer of opinion required. Correct Answer Incorrect Answer
    E No disclosure if waiver covers 9 months. Correct Answer Incorrect Answer

    Solution

    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 adverse/disclaimer unless disclosures inadequate.

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