What is a going concern in auditing?
Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future. Certain expenses and assets may be deferred in financial reports if a company is assumed to be a going concern.
Who is responsible for assessing going concern?
12. The auditor shall evaluate management’s assessment of the entity’s ability to continue as a going concern.
What are the auditor’s responsibilities for going concern assumptions in Australia?
When events or conditions have been identified which may cast significant doubt on the entity’s ability to continue as a going concern, the auditor is required under ASA 570 to: • review management’s plans for future actions based on its going concern assessment; • gather sufficient appropriate audit evidence to …
What should auditors do for assessing going concern of clients?
Further procedures that the auditor may perform to conclude whether a material going concern uncertainty exists include:
- Analysing and discussing the entity’s latest available interim financial statements.
- Reading the terms of debentures and loan agreements and determining whether any have been breached.
What is the responsibility of the management regarding going concern?
If the auditor determines that the accounts adequately describe the nature and implications of the material uncertainty and the management’s plans to deal with it and disclose clearly that the entity may be unable to realise its assets and discharge its liabilities in the normal course of business, the auditor will not …
What is management responsibilities as far as financial reporting is concern?
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, including safeguarding of assets against unauthorized acquisition, use or disposition.
Why does the auditor consider going concern when auditing a client?
The going concern basis assumes that the entity is expected to be able to: Pay its debts as and when they fall due. Continue in operation without any intention or necessity to liquidate or otherwise wind up its operations.
Why going concern consideration is important in completing the audit?
It is important that auditors communicate with management and, where appropriate, those charged with governance early in the audit to obtain an understanding of how management intends to assess the entity’s ability to continue as a going concern and to enable the auditor to communicate any events or conditions relating …
What should the auditor consider when evaluating whether an entity is a going concern?
The auditor should evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time in the following manner: If the auditor concludes that substantial doubt does not exist, he should consider the need for disclosure.
Why do we have to consider going concern assumption in our audit?
assumption is a matter for the auditor to consider on every audit engagement. “Going Concern,” establishes the relevant require- ments and guidance with regard to the auditor’s consideration of the appropriateness of manage- ment’s use of the going concern assumption and auditor reporting.
What are the responsibilities of auditors and director regarding going concern?
The auditor’s responsibility is to obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements and to conclude whether there is a material uncertainty about the entity’s ability to continue as a going concern.
What does guide on going concern auditor responsibilities do?
The Guide aims to help the auditor in performing an evaluation of appropriateness of the company’s going concern assumption during the audit of financial statements.
What are the responsibilities of an audit auditor?
Auditors’ responsibilities In general, the auditor is required to plan and perform audit procedures to obtain reasonable assurance that the financial statements give a true and fair view (or are fairly presented in all material respects).
What is Isa 570 for audit of going concern?
ISA 570 deals with the auditor’s responsibilities in auditing the management’s use of the going concern basis in the preparation and presentation of the accounts. The standard sets the objectives of the auditor’s work and the specific requirements to fulfil.
When do directors need to consider a going concern?
The period of time that needs to be considered by directors for assessing going concern is not set at a maximum by the accounting standards. However the FRSSE provides that management should disclose in the accounts where the period considered in making its assessment is less than twelve months from the date of the approval of the accounts.