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COMPLETING THE AUDIT - Coggle Diagram
COMPLETING THE AUDIT
Audit procedures in respect of going concern
review minutes that relates to financial difficulties and action to overcome financial problem
inquire of entity's lawyer regarding litigation and claims
review terms of debentures and loan agreements
obtain letter for financial support
review events after period end for item affect entity's ability to continue as going concern
seek written representation from management for plans, forecast and action to be taken
analyse and discuss cash flow, profit forecast with management
Auditor procedures in opening balance
ascertain previous year audit report whether is has been modified or not and take appropriate action
consider request for information form previous auditor if prior FS audited by other auditors
ascertain the accounting policies adopted and determine whether it is consistently applied
assess materiality of opening balances relative to current period's FS
What auditor need to be alert for going concern
Other indicators
pending legal proceedings against the entity
changes in legislation or goverment policy expected to adversely affect entity
financial indications
inability to obtain financing
adverse key financial ratios
net liabilities of net current liabilities
operating indications
loss of major market, franchise or principle supplier
shortage of important supplies
loss of management personnel without replacement
Steps to be taken by auditors for going concern
obtain information about management plan if there is substantial doubt
consider adequacy of disclosures with respect to uncertainty and include and explanatory if auditor conclude that there is substantial doubt
evaluate whether results of audit procedures performed during course of audit provide any indications of events or conditions which may cause substantial doubt
Purpose of Analytical Procedures
substantive test to reduce detection risk during the audit
form conclusion that FS is consistent with auditor's knowledge of business at end of audit
assist in planning the audit by understand business and identify areas of risk and determine nature, timing and extent of auditor procedures
Auditor's reponsibility for going concern
consider appropriateness of management's use of going concern assumption in the preparation of FS
alert whether any material uncertainties about entity's ability to continue as going concern
ISA 520
auditor should apply analytical procedures at or near the end of audit