ACCT 3205 · The Auditor's Report · Opinion, Key Audit Matters, Going Concern

Led by Dorothy Rigour Simulacrum

1. Module 5 ○ Open

   The Auditor's Report · Opinion, Key Audit Matters, Going Concern

   Led by Dorothy Rigour Simulacrum

   The question

   The auditor's report — the visible output of the audit, substantially revised since 2016 to be more informative. The module covers the modern report structure (opinion, basis for opinion, key audit matters, going concern, other information, responsibilities), the difference between unmodified and modified opinions (qualified, adverse, disclaimer), the going-concern conclusion under ISA UK 5700, the KAM disclosures under ISA UK 7010, and the FRC-required additions for UK PIE audits. The worked scenario drafts the Halberd plc 2024 report including three KAMs (goodwill impairment, revenue recognition, pension assumptions).

   Outcome

   The student can draft an unmodified UK auditor's report including KAMs and going-concern conclusion; can articulate when a qualified, adverse, or disclaimer opinion is required; and can explain the difference between modification and emphasis-of-matter. (Auditor's report)

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   Practice scenarios

   Drafting Halberd's 2024 Auditor's Report

   You draft Halberd plc's 2024 auditor's report including the unmodified opinion, the going-concern conclusion, and three key audit matters (goodwill impairment, revenue recognition, pension assumptions). The work tests whether you can produce a CPR-Part-35-style document that satisfies the modern auditor's report requirements and survives review by both the EQR and the audit committee chair.

   Your goals

   • Draft the opinion paragraph: unmodified, language as per ISA UK 7000.
   • Draft the basis for opinion paragraph including independence affirmation.
   • Draft the going-concern conclusion: positive statement; reference to enhanced procedures including stress-testing of cash forecast through 2026.
   • Draft the three key audit matters: for each, the description, why significant, how addressed, the auditor's findings.
   • For KAM 1 (goodwill impairment): describe the £11.1m impairment, the management's value-in-use methodology, the audit's challenge of key assumptions (discount rate, terminal growth, forecast EBITDA), the engagement of a valuation specialist, the auditor's findings (the impairment recognised was within the auditor's range of acceptable estimates).
   • For KAM 2 (revenue recognition): describe the long-term contracts portfolio, the management's IFRS 15 application (over-time recognition with input method), the audit's procedures (vouching, percentage-of-completion review, customer confirmation), the findings.
   • For KAM 3 (pension assumptions): describe the assumptions (discount rate 5.0%, longevity per CMI 2023 model with 1.0% trend), the audit's challenge (engagement of actuarial specialist), the findings.
   • Frame the report appropriately for a UK listed plc: include all the FRC-required elements (s172 review; viability statement review; long-form report items).
   • Frame as a 2,000-word draft for review by the EQR.

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