ISA 570 (Revised) — Going Concern

ISA 570 (Revised) DEALS with the auditor’s responsibilities in the ‘Audit‘ of Financial Statements RELATING to going concern and the Implications for the auditor’s report.

Table of Contents

ISA 570 (Revised) – Introduction
- 1. Scope of this ISA
- 2. Effective Date
ISA 570 – Objectives
ISA 570 – Requirements
Synopsis

ISA 570 (Revised) – Introduction

1. Scope of this ISA

It deals with the Auditor’s responsibilities in the audit of financial statements Relating to going concern and the Implications for the auditor’s report.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods ending on or after December 15, 2016.

ISA 570 – Objectives

The Objectives of the ‘Auditor’ are:

To OBTAIN sufficient appropriate audit evidence on the appropriateness of Management’s use of going concern basis;
To CONCLUDE whether a Material uncertainty exists; AND
To REPORT in accordance with this ISA.

ISA 570 – Requirements

1. Risk Assessment Procedures and Related Activities

As Per ISA 315 (Revised), the ‘Auditor’ shall CONSIDER whether events or conditions exist that may cast SIGNIFICANT doubt on the entity’s ability to continue as a Going Concern.

The ‘Auditor’ shall DETERMINE whether Management has already performed a PRELIMINARY assessment of the Entity’s ability to continue as a going concern.

2. Evaluating Management’s Assessment

In evaluating Management’s assessment of the entity’s ability, the auditor shall COVER the same period as that used by Management to Make its assessment.

3. Period Beyond Management’s Assessment

The ‘Auditor’ shall INQUIRE of Management as to its knowledge of events or conditions that May cast SIGNIFICANT doubt on the Entity’s ability to continue as a going concern.

4. Additional Audit Procedures When Events or Conditions are Identified

These ‘Procedures’ shall INCLUDE:

(a) Where Management has yet not performed an assessment, REQUESTING Management to Make its assessment.

(b) EVALUATING Management’s plans for future actions in relation to its going concern assessment.

(c) Where the entity has prepared a ‘Cash Flow Forecast’:
– EVALUATING the reliability of the underlying data generated to prepare the forecast; AND
– DETERMINING whether there is adequate support for the assumptions underlying the forecast.

(d) CONSIDERING whether any additional facts or information have become available.

(e) REQUESTING Written Representations from Management and where appropriate those charged with governance regarding their plans for future actions and the feasibility of these plans.

5. Auditor Conclusions

The ‘Auditor’ shall EVALUATE whether sufficient appropriate audit evidence has been obtained and shall CONCLUDE on the appropriateness of Management’s use of going concern basis of accounting in the preparation of the financial statements.

5.1 Adequacy of Disclosures When Events or Conditions Have Been Identified and a Material Uncertainty Exists

The ‘Auditor’ shall DETERMINE whether the Financial Statements:

Adequately disclose the principal events or conditions and Management’s plans to deal with these events or conditions; AND
Disclose clearly that there is a Material Uncertainty and therefore, that it May-be UNABLE to Realize its assets and discharge its liabilities in the Normal course of business.

5.2 Adequacy of Disclosures When Events or Conditions Have Been Identified but No Material Uncertainty Exists

The ‘Auditor’ shall EVALUATE whether the financial statements provide adequate disclosures about these events or conditions.

6. Implications for the Auditor’s Report

6.1 Use of Going Concern Basis of Accounting is Inappropriate

The ‘Auditor’ shall express an ADVERSE opinion.

6.2 Use of Going Concern Basis of Accounting is Appropriate but a Material Uncertainty Exists

6.2.1 Adequate Disclosure of a Material Uncertainty is Made in the Financial Statements

The ‘Auditor’ shall Express an UNMODIFIED opinion and the auditor’s report shall INCLUDE a Separate Section under the heading ‘Material Uncertainty Related to Going Concern‘.

6.2.2 Adequate Disclosure of a Material Uncertainty is Not Made in the Financial Statements

The ‘Auditor’ shall:

Express a QUALIFIED opinion or ADVERSE opinion as per ISA 705 (Revised); AND
In the Basis for Qualified (Adverse) Opinion Section, STATE that a Material Uncertainty exists.

6.2.3 Management Unwilling to Make or Extend Its Assessment

The ‘Auditor’ shall CONSIDER the Implications for the auditor’s report.

7. Communication with Those Charged with Governance

Unless All Those Charged With Governance are Involved in Managing the Entity, the Auditor Shall COMMUNICATE the Following:
(a) Whether the events or conditions constitute a Material Uncertainty;
(b) Whether Management’s use of the going concern basis of accounting is appropriate;
(c) The adequacy of related disclosures in the Financial Statements; AND
(d) Where applicable, the Implications for the auditor’s report.

8. Significant Delay in the Approval of Financial Statements

The ‘Auditor’ shall INQUIRE as to the Reasons for the delay.

Synopsis

ISA 570 ‘Going Concern‘ DEALS with the auditor’s responsibilities in the ‘Audit’ of Financial Statements relating to going concern and the Implications for the auditor’s report.

[500-599] Audit Evidence