Guide to Using International Standards on Auditing in - IFAC

More documents

Recommendations

Info

168 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts The following exhibit sets out the steps the audi<strong>to</strong>r would take <strong>to</strong> address going-concern issues. Exhibit 14.4-1 Address Obtaining Management’s Assessment and Plan Evaluating Management’s Plans of Action Obtaining Written Confirmations Description If not already provided, request management <strong>to</strong> make an assessment of the entity’s ability <strong>to</strong> continue as a going concern. Evaluate management’s future actions <strong>to</strong> address the going-concern assessment. Address: • Will outcome of plans improve the situation? • Are the plans feasible under the circumstances? • How reliable are the profit/cash-flow forecasts, and what support is there for the assumptions used? • Identifying, discussing, and obtaining evidence for other fac<strong>to</strong>rs that may affect the entity’s ability <strong>to</strong> continue as going concern, such as: – Poor recent operating results, – Breaches in terms of debentures and loan agreements, – References in meeting minutes <strong>to</strong> financing difficulties, – Existence of litigation/claims and estimates of financial implications, – Existence, legality, and enforceability of arrangements <strong>to</strong> provide or maintain financial support with related and third parties, – Financial ability of related and third parties <strong>to</strong> provide additional funds or loan guarantees, – Other subsequent events, and – Indica<strong>to</strong>rs of fraud such as management override, fictitious transactions, or concealment of material facts. • Continued existence, terms, and adequacy of borrowing facilities. • Reports on regula<strong>to</strong>ry actions. • Adequacy of support for any planned disposals of assets. Also consider the impact of any additional facts or information since the date management made its assessment and plans. Request written representations from management (and those charged with governance) regarding their plans for future action and feasibility.
169 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts 14.5 Reporting Paragraph # Relevant Extracts from ISAs 570.17 Based on the audit evidence obtained, the audi<strong>to</strong>r shall conclude whether, in the audi<strong>to</strong>r’s judgment, a material uncertainty exists related <strong>to</strong> events or conditions that, individually or collectively, may cast significant doubt on the entity’s ability <strong>to</strong> continue as a going concern. A material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence is such that, in the audi<strong>to</strong>r’s judgment, appropriate disclosure of the nature and implications of the uncertainty is necessary for: (Ref: Para. A19) (a) In the case of a fair presentation financial reporting framework, the fair presentation of the financial statements, or (b) In the case of a compliance framework, the financial statements not <strong>to</strong> be misleading. 570.18 If the audi<strong>to</strong>r concludes that the use of the going concern assumption is appropriate in the circumstances but a material uncertainty exists, the audi<strong>to</strong>r shall determine whether the financial statements: (a) Adequately describe the principal events or conditions that may cast significant doubt on the entity’s ability <strong>to</strong> continue as a going concern and management’s plans <strong>to</strong> deal with these events or conditions; and (b) Disclose clearly that there is a material uncertainty related <strong>to</strong> events or conditions that may cast significant doubt on the entity’s ability <strong>to</strong> continue as a going concern and, therefore, that it may be unable <strong>to</strong> realize its assets and discharge its liabilities in the normal course of business. (Ref: Para. A20) 570.19 If adequate disclosure is made in the financial statements, the audi<strong>to</strong>r shall express an unmodified opinion and include an Emphasis of Matter paragraph in the audi<strong>to</strong>r’s report <strong>to</strong>: (a) Highlight the existence of a material uncertainty relating <strong>to</strong> the event or condition that may cast significant doubt on the entity’s ability <strong>to</strong> continue as a going concern; and (b) Draw attention <strong>to</strong> the note in the financial statements that discloses the matters set out in paragraph 18. (See ISA 706.) (Ref: Para. A21-A22) 570.20 If adequate disclosure is not made in the financial statements, the audi<strong>to</strong>r shall express a qualified opinion or adverse opinion, as appropriate, in accordance with ISA 705. The audi<strong>to</strong>r shall state in the audi<strong>to</strong>r’s report that there is a material uncertainty that may cast significant doubt about the entity’s ability <strong>to</strong> continue as a going concern. (Ref: Para. A23-A24) 570.21 If the financial statements have been prepared on a going concern basis but, in the audi<strong>to</strong>r’s judgment, management’s use of the going concern assumption in the financial statements is inappropriate, the audi<strong>to</strong>r shall express an adverse opinion. (Ref: Para. A25-A26) 570.22 If management is unwilling <strong>to</strong> make or extend its assessment when requested <strong>to</strong> do so by the audi<strong>to</strong>r, the audi<strong>to</strong>r shall consider the implications for the audi<strong>to</strong>r’s report. (Ref: Para. A27) 570.23 Unless all those charged with governance are involved in managing the entity, the audi<strong>to</strong>r shall communicate with those charged with governance events or conditions identified that may cast significant doubt on the entity’s ability <strong>to</strong> continue as a going concern. Such communication with those charged with governance shall include the following: (a) Whether the events or conditions constitute a material uncertainty; (b) Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements; and (c) The adequacy of related disclosures in the financial statements.
Page 1 and 2:
Guide to</
Page 3 and 4:
3 Guide to
Page 5 and 6:
5 Guide to
Page 7 and 8:
Disclaimer This Guide</stro
Page 9 and 10:
9 Guide to
Page 11 and 12:
11 Guide t
Page 13 and 14:
13 2. Clarified ISAs In March 2009,
Page 15 and 16:
15 Guide t
Page 17 and 18:
17 Guide t
Page 19 and 20:
Volume 1 Core Concepts
Page 21 and 22:
21 Guide t
Page 23 and 24:
23 Guide t
Page 25 and 26:
25 Guide t
Page 27 and 28:
27 Guide t
Page 29 and 30:
29 Guide t
Page 31 and 32:
31 Guide t
Page 33 and 34:
33 Guide t
Page 35 and 36:
35 Guide t
Page 37 and 38:
37 Guide t
Page 39 and 40:
39 Guide t
Page 41 and 42:
41 Guide t
Page 43 and 44:
43 Guide t
Page 45 and 46:
45 Guide t
Page 47 and 48:
47 Guide t
Page 49 and 50:
49 Guide t
Page 51 and 52:
51 5. Internal Control — Purpose
Page 53 and 54:
53 Guide t
Page 55 and 56:
55 Guide t
Page 57 and 58:
57 Guide t
Page 59 and 60:
59 Guide t
Page 61 and 62:
61 Guide t
Page 63 and 64:
63 Guide t
Page 65 and 66:
65 Guide t
Page 67 and 68:
67 Guide t
Page 69 and 70:
69 Guide t
Page 71 and 72:
71 Guide t
Page 73 and 74:
73 Guide t
Page 75 and 76:
75 Guide t
Page 77 and 78:
77 6. Financial Statement Assertion
Page 79 and 80:
79 Guide t
Page 81 and 82:
81 Guide t
Page 83 and 84:
83 Guide t
Page 85 and 86:
85 Guide t
Page 87 and 88:
87 Guide t
Page 89 and 90:
89 Guide t
Page 91 and 92:
91 Guide t
Page 93 and 94:
93 Guide t
Page 95 and 96:
95 Guide t
Page 97 and 98:
97 Guide t
Page 99 and 100:
99 Guide t
Page 101 and 102:
101 Guide
Page 103 and 104:
103 Guide
Page 105 and 106:
105 Guide
Page 107 and 108:
107 Guide
Page 109 and 110:
109 Guide
Page 111 and 112:
111 Guide
Page 113 and 114:
113 Guide
Page 115 and 116:
115 10. Further Audit Procedures Ch
Page 117 and 118: 117 Guide
Page 145 and 146: 145 12. Related Parties Chapter Con
Page 161 and 162: 161 14. Going Concern Chapter Conte
Page 167: 167 Guide
Page 171 and 172: 171 15. Summary of Other ISA Requir
Page 205 and 206: 205 16. Audit Documentation Chapter
Page 219 and 220:
219 Guide
Page 221 and 222:
221 Guide
Page 223 and 224:
223 Guide
Page 225 and 226:
225 Guide
Page 227 and 228:
227 Guide
Page 229 and 230:
229 Guide
Page 231 and 232:
231 Guide
Page 233 and 234:
233 Guide
Page 235 and 236:
235 Guide
show all

Guide to Using International Standards on Auditing in - IFAC

Create successful ePaper yourself

Delete template?

Save as template?