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Hello Sir,
I want to know what is the auditor’s responsibility regarding the going concern assessment at the planning stage and finalisation stage ?
Thankyuou
kind regardsThe auditor can’t do a great deal at the planning stage as this is usually too far in advance. The duty to assess going concern is management’s: the auditor has to examine what management looked at and to assess if management’s assessment is correct. Going concern is the assumption that the organisation will continue in the foreseeable future – taken as the next 12 months.
Results are:
1 Management assesses GC OK and auditors agree – no implications.
2 management assesses GC not OK, discloses in notes and auditors agree – an emphasis of matter in the audit report to draw users’ atention to the risk.
3 management assess GC as OK (so no note in the FS), but auditors disagree, then the FS do not show a TT&F view and auditors would qualify their opinion.
hello Sir,
actually i was doing a kaplan mock exam june 2012 in which there was an audit risk that the client is trying to generate revenue through diversification that is by selling products other than those which are actually sold in his usual business so this cast a doubt on the entitys viability to continue as a going concern.
The audit response as suggested was that auditir should design procedures at planning stage to assess the going concern .
thanksI don’t really agree with the suggested answer. The planning stage could be 6 months before year end and might have little to do with the going concern problem. The primary tool for going concern assessment is the cash flow forecast, because busineses go out of business when cash runs out. Diversifying is a business risk (but business risk is not on the F8 syllabus). Going concern indicators are on the syllabus, but I do not think that diversification is, of itself, an indicator.
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