Group audits - more detail

When financial statements are prepared on a going concern basis, assets and liabilities are recorded on the basis that -

The entity will be able to realise its assets and discharge its liabilities in the normal course of business, because the entity can guarantee that it will continue in business in the foreseeable future

The entity will not be able to realise its assets and discharge its liabilities in the normal course of business, as it is unlikely that the entity will continue in business in the foreseeable future

The entity will be able to realise its assets and discharge its liabilities in the normal course of business, as it is assumed that the entity will continue in business in the foreseeable future

The entity will not be able to realise its assets and discharge its liabilities in the normal course of business, as management has no realistic alternative but to liquidate the entity

If the period considered for the going concern assessment is less than twelve months from the balance sheet date, ISA 570 requires the auditor to -

Request management to extend its assessment period to at least twelve months from the approval of the accounts

Disclose that fact in the auditor report

Request management to disclose that fact in the accounts

Request management to extend its assessment period to at least twelve months from the balance sheet date

ISA 570 clarifies the responsibilities of the auditor in respect of the going concern assumption in the accounts. In particular the auditor is responsible for -

Concluding whether the use of the going concern assumption is not appropriate

Evaluating the conclusions made by management about the use of the going concern assumption and concluding whether a material uncertainty exists

Undertaking the going concern assessment for the entity and making related disclosures

Concluding whether a material uncertainty exists

Which of the following events and conditions may, on their own, cast doubt about the ability of entity to continue as a going concern -

Neither of the other answers

Both of the other answers

Indications of withdrawal of financial support by creditors or shortage of important supplies

Difficult general economic conditions

If the auditor asks management to extend the going concern assessment to twelve months after the balance sheet date but management is unwilling to do so, the auditor shall -

Express an adverse opinion

Disclose that fact in the auditor report

Express a qualified opinion or a disclaimer of opinion as that would constitute a limitation in scope of the audit

Include an emphasis of matter paragraph to highlight the existence of a material uncertainty

If the going concern assessment for a small entity assumes the continued support of the owner-manager, the auditor shall -

Obtain written representations in such respect from the owner-manager

Evaluate whether the owner-manager will be capable of meeting the future obligations of the entity

Obtain appropriate evidence as to whether the owner-manager intends and is able to continually support the entity in the foreseeable future

Include an emphasis of matter paragraph to highlight the existence of a material uncertainty

When events and conditions that may cast significant doubt about the ability of the entity to continue as a going concern have been identified, the auditor shall -

Perform additional audit procedures to conclude whether a material uncertainty about going concern exists

Include an emphasis of matter paragraph to highlight the existence of a material uncertainty

Conclude that a material uncertainty about going concern exists and needs to be disclosed in the financial statements

Disclose that fact in the auditor report

When the auditor concludes that the use of the going concern assumption is appropriate, but a material uncertainty exists and that the financial statements do not include adequate disclosures, the auditor report shall -

Express a qualified opinion or adverse opinion in respect of the inadequate disclosures and shall also indicate that there is a material uncertainty in respect of going concern

Not be qualified but will include an emphasis of matter paragraph highlighting the existence of a material uncertainty

Express a qualified opinion or a disclaimer of opinion

Be unmodified

If the auditor concludes that the use of the going concern assumption is appropriate but a material uncertainty exists and that the accounts adequately describe the material uncertainty and the management 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 report shall -

Express a qualified opinion or adverse opinion in respect of the inadequate disclosures and shall also indicate that there is a material uncertainty in respect of going concern

Express a qualified opinion or a disclaimer of opinion

Be unmodified

Not be qualified but will include an emphasis of matter paragraph highlighting the existence of a material uncertainty and drawing attention to the note in the accounts that includes the going concern disclosures

Which of the following events and conditions may, on their own, cast doubt about the ability of a smaller entity to continue as a going concern, bearing in mind that size may negatively affect the ability to withstand adverse conditions -

Both of the other answers

The risk that banks and other lenders may cease to support the entity or the possible loss of a principal supplier, major customer, key employee

Neither of the other answers

Difficult general economic conditions

Group audits - more detail

When financial statements are prepared on a going concern basis, assets and liabilities are recorded on the basis that -

If the period considered for the going concern assessment is less than twelve months from the balance sheet date, ISA 570 requires the auditor to -

ISA 570 clarifies the responsibilities of the auditor in respect of the going concern assumption in the accounts. In particular the auditor is responsible for -

Which of the following events and conditions may, on their own, cast doubt about the ability of entity to continue as a going concern -

If the auditor asks management to extend the going concern assessment to twelve months after the balance sheet date but management is unwilling to do so, the auditor shall -

If the going concern assessment for a small entity assumes the continued support of the owner-manager, the auditor shall -

When events and conditions that may cast significant doubt about the ability of the entity to continue as a going concern have been identified, the auditor shall -

When the auditor concludes that the use of the going concern assumption is appropriate, but a material uncertainty exists and that the financial statements do not include adequate disclosures, the auditor report shall -

Which of the following events and conditions may, on their own, cast doubt about the ability of a smaller entity to continue as a going concern, bearing in mind that size may negatively affect the ability to withstand adverse conditions -

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