ISA 570

Question 1

MANAGEMENT’S RESPONSIBILITIES:

Answer 1

If management is preparing general purpose financial statements, it is required to assess whether
entity is going concern for atleast 12 months.
 If assessment period is less than 12 months, it will be a scope limitation.
 If entity has profitable operations and ready access to financial resources, management may
make assessment without detailed analysis.

Question 2

AUDITOR’S RESPONSIBILITIES:

Answer 2

Auditor shall perform following risk assessment procedures and related activities to identify events
or conditions which may cast doubt on entity’s ability to continue as going concern:
 Inquire from management whether it has identified any events or conditions.
 When performing risk assessment procedures (required by ISA 315), consider whether
events or conditions exist.
 Remain alert throughout the audit.

Question 3

Study Tips

Answer 3

If there is significant delay in approval of financial statements, auditor shall inquire reason of delay. If
auditor believes that delay could be related to going concern issues, auditor shall perform additional
audit procedures.

Question 4

Additional procedures if events/conditions are identified:

Answer 4

1. Evaluate management’s plan for future action, and whether it is feasible***.
2. Obtain representation from management/TCWG regarding these plans and their feasibility.
3. If management has prepared a cash flow forecast, evaluate:
   a. reliability of data used, and
   b. adequate support for assumptions used.
4. Consider additional facts or information after the date of assessment.

Question 5

***Exam Tip

Answer 5

In exam question, you have to specifically comment on each and every plan of action mentioned in
question (in addition to above general procedures) e.g. it could be support from a related party,
temporarily closing plant, investment in capital expenditure.