going concern issues

Question 1

reasonable period of time

Answer 1

a period of time not to exceed one year beyond the date of the financials being audited

Question 2

the auditors normal procedures would be sufficient in detecting a ______issue

Answer 2

going concern

Question 3

indicators of substantial doubt

Answer 3

negative trends- recurring losses, negative cashflows or working capital deficiencies

other indicators-defaults on debt, violation of debt covenants, debt restructure, disposal of major assets

internal matters-labor problems, dependence on single projects or customers, harmful longterm commitments

external matters-lawsuits, catastrophic losses, harmful legislation, downturn in economy etc

Question 4

when the auditor has substantial doubt about a going concern issue, the auditors reporting responsibilities extend to ______ after the bs date

Answer 4

one year

Question 5

additional evidence gathering would be

Answer 5

inquire management how they are going to overcome financial difficulties

plan and perform audit procedures to evaluate the feasibility of management plan

the auditor should get written rep from management for two matters

managements plan to mitigate adverse effects
and
management’s belief that the financials include all relevant matters