Planning the Audit and Performing Risk APlanning the Audit and Performing Risk Assessment Procedures

Planning the Audit and Performing Risk Assessment Procedures

16 In obtaining an understanding of the entity, the auditor shall consider whether there are events or conditions and related business risks which may cast significant doubt on the entity’s ability to continue as a going concern.

17 The auditor shall remain alert for audit evidence of events or conditions and related business risks, which may cast significant doubt on the entity’s ability to continue as a going concern, in performing audit procedures throughout the audit. If such events or conditions are identified, the auditor shall, in addition to performing the procedures in paragraph 31, consider whether they affect the auditor’s assessment of the risks of material misstatement.

18 Under paragraph 16 of this Auditing Standard, the auditor needs to consider events and conditions relating to the going concern assumption when performing risk assessment procedures, because this allows for more timely discussions with management, review of management’s plans and resolution of any identified going concern issues.

19 In some cases, management may have already made a preliminary assessment when the auditor is performing risk assessment procedures. If so, under ASA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, the auditor needs to review that assessment to determine whether management has identified events or conditions, such as those discussed in paragraph 13 of this Auditing Standard, and management’s plans to address them.

20 If management has not yet made a preliminary assessment, the auditor ordinarily discusses with management the basis for their intended use of the going concern assumption, and enquires of management whether events or conditions, such as those discussed in paragraph 13, exist. The auditor may request management to begin making its assessment, particularly when the auditor has already identified events or conditions relating to the going concern assumption.

21 Under paragraph 17 of this Auditing Standard, the auditor needs to consider the effect of identified events or conditions when assessing the risks of material misstatement and, therefore, their existence may affect the nature, timing and extent of the auditor’s further procedures in response to the assessed risks.