CA Prashant is appointed as statutory auditor of Sober Pvt. Ltd. under the Companies Act 2013 for the first time. The company is preparing its…

In the given case, following factors are indicator of material uncertainty that may cast significant doubt on the company's ability to continue as a going concern: The ageing schedule of the company reflects that company is not able to pay its creditors on time. Outstanding creditors for a period of 1 year or more account for 80% of total creditors of the company.Most of key financial ratios are adverse.Bankers have refused further debits in cash credit accounts due to negative drawing power from March, 2025.Cash credit loans are repayable on demand.There is no other information available on how the company plans to run its business without bank finance. Also, upon inquiry with the management, it was identified that management did not have any major future contracts to boost their revenue and financial position. All the above factors indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern and appropriate disclosure of this fact is also not made in financial statements. Therefore, it is a situation where material uncertainty exists, which has cast significant doubt on company's ability to continue as going concern in accordance with SA 570, “Going Concern”. Considering above the fact that although a material uncertainty exists casting significant doubt on the ability of the company to continue as going concern, adequate disclosure of material uncertainty is not made in financial statements. Thus, CA Prashant shall give qualified or adverse opinion in accordance with SA 705, “Modifications to the Opinion in the Independent Auditor's Report".