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The Auditing Standard of ASA 570 Going Concern is concerned with the duties of the auditor in the audit of the financial statements pertaining to the ongoing concern and the consequences for the audit report. The quarterly statements is prepared on the accounting basis of the ongoing concern, on the assumption that the business has become an ongoing concern and will carry out its operations in the nearish term. General purpose financial accounts are compiled using the accounting basis of the going concern, until leadership either plans to pay a debt or suspend actions of the entity, or has no rational alternative however to do so. Financial accounts for special in compliance with a financial reporting scheme for which the accounting basis of the current concern is adequate, the object may or may not be prepared. If the usage of the existing business accounting basis is fair, revenue and expenses are recorded on the assumption that, in the normal course of service, the corporation can realize its assets and discharge its liabilities. Most of the financial reporting mechanisms provide a clear provision for management to make a detailed examination of the aptitude of the company to continue as an ongoing concern, and requirements for concerns to be considered and reported in relation to the ongoing concern. For example, AASB 101 of the Australian Accounting Standard allows management to determine the capacity of an institution to continue as a continuing concern. Detailed provisions on the duty of management to ascertain the capacity of the entity to continue as a continuing issue and relevant disclosures of financial statements can also be set out in legislation or regulation (Guo, Delaney & Ahmed, 2020).
The auditor's priorities are:
(a) Provide and conclude on the adequacy of management's use of the current accounting basis in the preparation of financial statements with satisfactory audit data;
(b) Suggest, mostly on basis of the review information gathered, if there is material uncertainty as to events or circumstances which may give rise to significant concerns as to the willingness of the company to proceed as a continuing focused entity.
(c) Reporting in compliance with the terms of this auditing standard (Wikforss, Kendeou & Robinson, 2019).
The auditor shall consider, in carrying out risk management procedures as specified by ASA 3153, If there are events or situations that could create significant questions regarding the business's opportunity to sustain as an ongoing issue. The auditor shall also decide whether management has already carried out a quick evaluation of the capacity of the entity to proceed as a continuing issue or whether management has already carried out a preliminary assessment. (a) Whether such an evaluation has been carried out the auditor shall discuss the assessment with management and decide whether management has defined incidents or circumstances which, collectively or individually, are likely to pose serious doubts as to the capacity of the company to continue as an ongoing issue and if so, the management's plans to address them; or if so, manager's planning to resolve individuals; (b) Even if an evaluation has still not been carried out. The audit shall address with administration the reasons for the proposed usage of the current concern's accounting basis and shall inquire with administration whether there are events or situations that are likely to cause significant questions, personally or collectively, regarding the company's ability to continue as a growing concern (Guo, Delaney & Ahmed, 2020).
In which leadership has not yet carried out an evaluation of the capacity of the organization to proceed as a continuing matter, leadership is asked to make an assessment.
(b) Assessing management plans for potential activities in relation to their current evaluation of issues, whether the result of such plans is likely to change the circumstance, as well as whether management strategies are realistic under the conditions (Geiger, Gold & Wallage, 2019).
(c) Where a cash flow forecast has been planned by the entity and the forecast analysis is a relevant element in the consideration of the future result of incidents or circumstances in the assessment of the management strategies for future actions (Guo, Delaney & Ahmed, 2020).
The reliability assessment of the underlying data produced to prepare the forecast; and
(a) Assessing whether the conclusions behind the prediction are sufficiently endorsed.
(b) Even if an evaluation has still not moved ahead with the audit should talk about the management the rationale for the planned usage regarding the accounting basis of the current concern and shall enquire incidents or situations that, separately or jointly, are likely to cause significant questions about the corporation's intention to maintain as an ongoing issue with the administration (Geiger, Gold & Wallage, 2019).
(d) Taking into account the existence of any new data or details after the date about which administration rendered its determination.
(e) Seeking written statements from leadership or where necessary, from those responsible for administration, addressing their future action plans and the viability of such plans (Meredith et al., 2020).
The auditor shall determine whether satisfactory audit information has been gathered in the preparation of the financial statements, with regard to the appropriateness of the management's use of the accounting basis of the outgoing subject, it shall proceed and conclude on it. The auditor shall determine, on the background of its audit data gathered, whether or not the auditor's decision is based on the audit evidence received., there is material confusion relating to incidents or circumstances which, collectively or individually, occur. The willingness of the organization to survive as a continuing issue could cast considerable doubt on it. Substantial complexity occurs where even the nature of its potential impact and probability of the risk is such that, in the view of the auditor, adequate evidence of the nature and effects of the uncertainty is needed for: (a) a realistic reporting of financial report in the event of a fair financial statements; Or (b) the fair reporting of the financial statements in the case of a system for enforcement.
Retrieved 18 December 2020, from https://www.auasb.gov.au/admin/file/content102/c3/ASA_570_2015.pdf
Geiger, M. A., Gold, A., & Wallage, P. (2019). A Synthesis of Research on Auditor Reporting on Going-Concern Uncertainty: An Update and Extension. FAR Report.
Guo, Y., Delaney, D., & Ahmed, A. (2020). Is an Auditor's Propensity to Issue Going Concern Opinions a Valid Measure of Audit Quality?. Australian Accounting Review.
McKenzie, P., Davis, J., Qiu, Y., Zhang, Y., Adler, D. G., Fang, J., & Gawron, A. J. (2020). Safety of endoscopist-directed nurse-administered balanced propofol sedation in patients with severe systemic disease (ASA class III). Gastrointestinal Endoscopy.
Meredith, K., Blake, J., Baxter, P., & Kerr, D. (2020). Drivers of and barriers to decision support technology use by financial report auditors. Decision Support Systems, 139, 113402.
Skraastad, E., & Ræder, J. Projct Protocol Date final revised: 2018-02-09 Project title:“Postoperative treatment with Efficacy Safety Score and wireless patient monitoring system at a general ward: a randomised controlled study.”.
Wikforss, Å., Kendeou, P., & Robinson, D. (2019). Critical thinking in the post-truth era. Misinformation and Fake News in Education, 279.
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