ASA 570 - Going Concern - April 2006
Evaluating Management’s AssessmentEvaluating Management’s Assessment
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Evaluating Management’s Assessment
22 The auditor shall evaluate management’s assessment of the entity’s ability to continue as a going concern.
23 The auditor shall consider the relevant period, as defined in this Auditing Standard. This period may be the same or may differ from the period used by management in making its assessment under the applicable financial reporting framework. If management’s assessment of the entity’s ability to continue as a going concern covers less than the relevant period used by the auditor, the auditor shall ask management to extend its assessment period to correspond to the relevant period used by the auditor.
24 Management’s assessment of the entity’s ability to continue as a going concern is a key part of the auditor’s consideration of the going concern assumption. As noted in paragraph 12, most financial reporting frameworks requiring an explicit management assessment specify the period for which management is required to take into account all available information.
25 In evaluating management’s assessment, the auditor ordinarily considers:
- The process management followed to make its assessment, the assumptions on which the assessment is based and management’s plans for future action.
- Whether the assessment has taken into account all relevant information of which the auditor is aware as a result of the audit procedures.
26 As noted in paragraph 11, when there is a history of profitable operations and a ready access to financial resources, management may make its assessment without detailed analysis. In such circumstances, the auditor’s conclusion about the appropriateness of this assessment normally is also made without the need for performing detailed procedures. When events or conditions have been identified which may cast significant doubt about the entity’s ability to continue as a going concern, under paragraph 31 of this Auditing Standard, the auditor needs to perform additional audit procedures.