（b）Possible audit reports and circumstances
（i）Where the auditors consider that there is a significant level of concern about the entity’s ability to continue as a going concern （but do not disagree with the going concern basis）, and where adequate disclosures of the situation are made, They modify （but do not qualify） their opinion by including an ‘emphasis of matter’ paragraph highlighting the existence of a material uncertainly as to the going concern status of the entity and drawing attention to the relevant note in the financial statements. Where adequate disclosures are not made, a qualified or adverse opinion will be issued.
（ii）Where the period to which directors have paid particular attention is less than 12 months from the balance sheet date, The auditors should consider the need to modify the audit report as a result of a limitation in the scope of the audit.
（iii）Where the auditors disagree with the preparation of the financial statements on the going concern basis, they should issue an adverse opinion. This is very rare because auditors rarely have sufficient evidence to be sure.
（iv）If the auditors are unable to form an opinion on the going concern status of a company because of a limitation in the scope of the audit, they will issue an ‘except for’ opinion, or ‘disclaimer of’ opinion – but this is unusual.
（c）Report issued to Corsco
（i）In the case of Corsco, there are some indicators of going concern problems. However, the company may still be a going concern and the fact that the company has been approached by take-over bidders does not necessarily mean that there is a going concern problem （possibly quite the opposite）.
（ii）The audit opinion issued on Corsco in the current year is not likely to make reference to the going concern status of the company, as in previous years. The situation has not deteriorated significantly in the current year and it will be difficult for auditors to justify any change in their opinion from previous years.
（d）Difficulties associated with reporting on going concern
（i）If the auditors of Corsco were to report on a going concern problem, the mere act of reporting might of itself create a going concern problem （a‘self-fulfilling prophecy’）. This is particularly the case with large ‘blue-chip’ companies where the issue of an audit report that is modified in any way is unusual and might well cause the company’s share price to drop, thus precipitating a going concern problem.
（ii）This means that it is very difficult for companies such as Corsco and their auditors to send out any clear signal to the markets without running the risk of creating a panic.
（iii）However, recent events show that the consequences of companies and auditors failing to report where severe financial difficulties are encountered can be disastrous for both the company （its employees and shareholders） and auditors alike.
（iv）Auditors are failing in their professional duties if they do not report on going concern problems of which they are aware; however, situations involving large companies are rarely clear cut and auditors who propose to make any changes at all to the audit report are likely to encounter fierce resistance from management who may genuinely believe that to make such a report would be wrong.
（V）In the company’s annual financial statements, it is not the place of the auditor of Corsco to substitute his judgement for that of directors. However, where large companies involved in complex financing arrangements are concerned, auditors may have to fight hard against vested and powerful interests if they disagree with the directors’ judgements and decide to make reference to the matter in the auditor’s report. An auditor making reference to going concern issues in an audit report in such circumstances may lose the audit （and any other work） and may run a significant risk of litigation.
（i）Where the auditors consider that there is a significant level of concern about the entity’s ability to continue as a going concern （but do not disagree with the going concern basis）, and where adequate disclosures of the situation are made, They modify （but do not qualify） their opinion by including an ‘emphasis of matter’ paragraph highlighting the existence of a material uncertainly as to the going concern status of the entity and drawing attention to the relevant note in the financial statements. Where adequate disclosures are not made, a qualified or adverse opinion will be issued.
（ii）Where the period to which directors have paid particular attention is less than 12 months from the balance sheet date, The auditors should consider the need to modify the audit report as a result of a limitation in the scope of the audit.
（iii）Where the auditors disagree with the preparation of the financial statements on the going concern basis, they should issue an adverse opinion. This is very rare because auditors rarely have sufficient evidence to be sure.
（iv）If the auditors are unable to form an opinion on the going concern status of a company because of a limitation in the scope of the audit, they will issue an ‘except for’ opinion, or ‘disclaimer of’ opinion – but this is unusual.
（c）Report issued to Corsco
（i）In the case of Corsco, there are some indicators of going concern problems. However, the company may still be a going concern and the fact that the company has been approached by take-over bidders does not necessarily mean that there is a going concern problem （possibly quite the opposite）.
（ii）The audit opinion issued on Corsco in the current year is not likely to make reference to the going concern status of the company, as in previous years. The situation has not deteriorated significantly in the current year and it will be difficult for auditors to justify any change in their opinion from previous years.
（d）Difficulties associated with reporting on going concern
（i）If the auditors of Corsco were to report on a going concern problem, the mere act of reporting might of itself create a going concern problem （a‘self-fulfilling prophecy’）. This is particularly the case with large ‘blue-chip’ companies where the issue of an audit report that is modified in any way is unusual and might well cause the company’s share price to drop, thus precipitating a going concern problem.
（ii）This means that it is very difficult for companies such as Corsco and their auditors to send out any clear signal to the markets without running the risk of creating a panic.
（iii）However, recent events show that the consequences of companies and auditors failing to report where severe financial difficulties are encountered can be disastrous for both the company （its employees and shareholders） and auditors alike.
（iv）Auditors are failing in their professional duties if they do not report on going concern problems of which they are aware; however, situations involving large companies are rarely clear cut and auditors who propose to make any changes at all to the audit report are likely to encounter fierce resistance from management who may genuinely believe that to make such a report would be wrong.
（V）In the company’s annual financial statements, it is not the place of the auditor of Corsco to substitute his judgement for that of directors. However, where large companies involved in complex financing arrangements are concerned, auditors may have to fight hard against vested and powerful interests if they disagree with the directors’ judgements and decide to make reference to the matter in the auditor’s report. An auditor making reference to going concern issues in an audit report in such circumstances may lose the audit （and any other work） and may run a significant risk of litigation.
