Ch.8 Going Concern

Question 1

Going concern definition

Answer 1

the entity is viewed as continuing in business for the foreseeable future.

Question 2

Going concern CAS?

Answer 2

CAS 570 : the auditor’s responsibilities in the audit of financial statements related to going concern and the implications for the auditor’s report

Question 3

Case tip

Answer 3

stay alert for negative changes = state them as ur audit responsibilities

Question 4

Auditors responsibility

Answer 4

assess if management has done an appropriate job of supporting the going-concern assumption
if doubt -> assess projected cash flow 12m+ other assumptions management made is correct
if management concluded wrong -> auditor report is impacted

Question 5

Risk assessment

Answer 5

the auditor must consider whether any events or conditions exist that “may cast significant doubt on the entity’s ability to continue as a going concern”

Question 6

Evaluating management assessment

Answer 6

When auditor thinks going concern is wrong- ask for the management assessment
The auditor should include procedures that address the existence, completeness, and accuracy of any assessment made.
CAS 570.15

Question 7

Auditor procedure for when there is a going concern

Answer 7

CAS 570.16
• request that management perform an assessment, if one has not been performed already

• evaluate management’s plan of action in relation to the assessment
• where a cash flow forecast has been prepared, evaluate the reliability of the underlying data
• consider whether any additional facts or information have come to light since the date of management’s assessment that may influence the conclusion
• request written representation from management regarding its plans for action

Question 8

Audit conclusions

Answer 8

based on evidence obtained make a conc:
• The going-concern assumption is appropriate.
• The going-concern assumption is appropriate but a material uncertainty exists
-determine whether the financial statements adequately disclose the events or conditions that have led to the material uncertainty and that a material uncertainty exists
• The going-concern assumption is not appropriate
-auditor will issue a qualified or adverse opinion
determine whether the financial statements are presented on a liquidation basis and whether there is adequate disclosure for the users of the financial statements.

Question 9

Audit conclusion - material uncertainty exists

Answer 9

a) YES -> 
is it disclosed in the FS? 
yes -> unmodified opinion w emphasis of matter paragraph
no ->qualified or adverse opinion
b) NO-> unmodified opinion

Question 10

Audit conclusion - no going concern

Answer 10

Is the FS prepared appropriately?
yes-> unmodified opinion w emphasis of matter paragraph
no -> adverse opinion