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SUMMARY OF SA 570 – GOING CONCERN

 Abhishek Sharma (https://www.taxdose.com/author/abhishek/)  Audit (https://www.taxdose.com/category/article/audit/), Updates

(https://www.taxdose.com/category/article/)  March 18, 2021 (https://www.taxdose.com/summary-of-sa-570-going-concern/)

Summary of SA 570

Going Concern

Going concern An accounting assumption on which the financial statements of an entity are prepared that the
business will go forever & forever. It will never end.

Primary responsibility to assess Going Concern Management

Factors on which going concern is assessed v Degree of future uncertainties;

v Size & complexity of an entity;

v Nature & condition of the business

Auditor’s responsibility To obtain audit evidences whether the assessment made by an entity regarding its going concern
is appropriate;

To identify any material uncertainty about the entity’s ability to continue as going
concern.

Indicators of Going Concerns Problem v Operating;

v Financial;

v Others

Auditor’s Duty

To identify whether there is an identification of any v By performing risk assessment procedures;

event that, may cast significant doubt on the entity’s
ability to continue as a going concern v Evaluation of management’s assessment regarding the going concern of the
entity;

v Obtaining audit evidence by remaining alert throughout the audit.

Evaluation of Management’ Assessment Factors to be v Assessment should includes all those factors that the auditor is aware
Considered during the audit;

v Assessment Must cover at least 12 months of period from the

date of financial statements;

v Same period shall covered by the auditor as covered by the

management while evaluating such assessment.

Audit Procedures When Events or Conditions Are Identified

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8/2/2021 Summary of SA 570 - Going Concern - TaxDose.com

Auditor’s Duty To Perform Additional v Identify existence of material uncertainties;

Procedures
v Ask management to make assessment; in case of non assessment by
management

v Evaluate management’s future plans to mitigate the going concern problem.

where the auditor Auditor’s Duty Auditor’s Report

concludes that the
material uncertainty
exists

Case :-1 But the use To determine whether the financial statements :- In case where adequate Unmodified/ Clear Opinion
going concern disclosure is made in the &Emphasis of matter
assumption is v Adequately describe the principal events or conditions financial statements, paragraph in the Auditor’s
appropriate that may cast significant doubt on the entity’s ability to Report
continue as a going concern ;

v Disclose clearly that there is a material uncertainty

related to events or conditions that may cast significant
doubt on the entity’s ability to continue as a
y/gst/)
going concern and, In case where adequate Qualified/ Adverse opinion
disclosure is not made in
v therefore, that it may be unable to realise its assets the financial statements,
egory/income- and discharge its liabilities in the normal course of
business

egory/company-
Case 2 :- But the use of Adverse opinion
going concern
assumption is not
appropriate
egory/gst)
In both the cases the auditor shall communicate with the TCWG that :-

v Whether the events or conditions constitute a material uncertainty;

v Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements;
and

v The adequacy of related disclosures in the financial statements.

Author Recent Posts

Abhishek Sharma (Https://Www.Taxdose.Com/Author/Abhishek/)

Is a Practicing CA from Delhi .

(https://www.taxdose.com/author/abhishek/)

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