Conformity with International Standards on Auditing
53 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 570 Going Concern, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 570 are:
This Auditing Standard requires the auditor to assess the appropriateness of the going concern assumption for the relevant period, which is 12 months from the date of the auditor’s current report to the expected date of the auditor’s report for the next reporting period. However, ISA 570 requires the auditor to consider the appropriateness of the going concern assumption for a period of at least, but not limited to, twelve months from the balance sheet date.
The following paragraph is provided as guidance in ISA 570, whereas in this Auditing Standard it has been expanded and is a specific mandatory requirement:
When this uncertainty is adequately disclosed in the financial report, the auditor’s report shall include an emphasis of matter section in accordance with ASA 701. An emphasis of matter section regarding a going concern uncertainty shall:
♦ state clearly that there is significant uncertainty whether the entity will continue as a going concern and, therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report; and
♦ adequately describe, or refer to a note to the financial report that adequately describes:
○ the principal conditions that raise doubt about the entity’s ability to continue as a going concern; and
○ the extent to which the financial report includes appropriate adjustments, if any, relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary if the entity does not continue as a going concern (paragraph 39).
The following specific requirements in this Auditing Standard are not included in ISA 570:
♦ When the auditor is satisfied that it is appropriate, based on all reasonably foreseeable circumstances facing the entity and the applicable financial reporting framework, for management to prepare the financial report on the going concern basis, the auditor shall issue an unmodified auditor’s report in accordance with ASA 700 The Auditor’s Report on a General Purpose Financial Report. (paragraph 35).
♦ When consideration of mitigating factors, in particular management’s plans, have had a significant effect upon the auditor in forming the opinion that the going concern basis is appropriate, the auditor shall specifically consider the adequacy of the disclosure in the financial report of matters such as:
Section Conformity with International Standards - ASA 570 - Going Concern - April 2006 - Conformity with International Standards on Auditing | Zoe
○ the principal conditions which initially caused the auditor to question the going concern basis, including as appropriate, management’s evaluation of their significance and possible effects; and
○ management’s plans and other mitigating factors, including as appropriate, relevant prospective financial information.
If the disclosures considered necessary by the auditor are not made, the auditor shall express a qualified opinion on the basis of the lack of disclosure in accordance with ASA 701 Modifications to the Auditor’s Report (paragraph 36).
♦ The auditor shall communicate with those charged with governance or management, as soon as practical, the impact on the auditor’s report where:
○ there is a material uncertainty as described at paragraphs 39 and 41;
○ the going concern assumption is inappropriate as described at paragraph 43; or
○ management is unwilling to extend its assessment as required by paragraph 46 (paragraph 50).
This Auditing Standard makes reference to requirements under the Corporations Act 2001 (paragraphs 9 and 52). ISA 570 does not make reference to any specific legislation.
This Auditing Standard includes Appendices 1 and 2 which link going concern considerations with types of auditor’s opinion and provides examples of mitigating factors. ISA 570 does not include these appendices.
This Auditing Standard provides Examples of Auditor’s Reports Modified Regarding the Going Concern Basis at Appendix 3, whereas ISA 570 includes examples of modifications within corresponding paragraphs (paragraphs 40 and 42).
ISA 570 includes a Public Sector Perspective section. This Auditing Standard does not include a separate section on the public sector as it is sector neutral.
Compliance with this Auditing Standard enables compliance with ISA 570.
Appendix 1
LINKING GOING CONCERN CONSIDERATIONS
WITH TYPES OF AUDIT OPINIONS
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