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Audit and Accountability. Questions and answers. - Essay Example
Finance & Accounting
Pages 26 (6526 words)
Outline directors’ and auditors’ responsibilities in determining whether a company is a “going concern.”?
The assessment as to whether a company can carry on as a going concern or not, is one which is the director’s responsibility.
Under the accounting standards directors are required to:
a) Make an appraisal regarding the ability of the company to carry on as a going concern; and
b) To make sure, about the uncertainties regarding a company’s ability to carry on as a going concern. These are sufficiently revealed in the financial statements.
Directors should also-
1. Apply a suitable degree of rigidity and procedure while making their conclusions to decide whether the business is feasible in going ahead with its objectives.
2. To plan assessment as early as possible, to keep the auditor in preparing financial statements on basis of going concern.
3. Draft disclosures before time, if needed be.
4. Take account of subsequent developments before time and not just on the financial reporting date or yearend date.
The Auditor’s Responsibility:
The responsibility of an auditor is
• To consider, the suitability of the management’s utilization of the assumption of going concern in preparing financial statement.
• To consider the going concern concept in the earlier stages of audit by considering the presence of events or situations and associated business risks that may cause doubt on the entity’s capability to maintain as a going concern. ...
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