Assurance Sections

Question 1

Common audit risk factors (Assurance)

Answer 1

• New or additional users
• Management bias
• Going concern
• Debt covenants
• Cash flow issues
• Control issues
• New problems or issues
• Significant growth in revenues or assets
• Legal claims
• High risk industry
• Complex systems
• Changes in operating environment
• New personnel
• Changes to information systems
• New technologies
• Changes in products or activities
• Corporate restructuring
• Expanded foreign operations
• New accounting pronouncements

Reference: CAS 315, Appendix 2

Question 2

Going Concern (Assurance)

Answer 2

• Risk assessment procedures:
  
  • Consider whether there are events or conditions which may cast doubt on going concern
  • Determine if management has already performed a preliminary assessment of going concern
• Audit procedures:
  
  • Evaluate management’s assessment of going concern
  • Inquire of management as to any subsequent events which may cast doubt on going concern
• If doubts exist:
  
  • Request management make an assessment, if not already performed
  • Evaluate management’s plans for future actions
  • Assess any cash flow forecasts
  • Consider additional information since the assumption was made
  • Request written representation from management
  • Consider whether FS disclosure is appropriate or whether a qualified or adverse opinion is required
  • Prepare communication for those charged with governance

Reference: CAS 570