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substantive procedures for evaluating going concern status of the entity

Going concern this assume that the entity will continue to operate for the foreseeable future with neither the intention nor necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws and regulation.  

The following are tests and procedures the auditor needs to perform to form an opinion on management conclusion that the company is going concern:

Check whether management has carried out going concern assessment and evaluate assessment done by management.

Perform other procedures as follows.

  • review cash flow forecasts in the subsequent account period for improvement
  • review management accounts and financial records in the subsequent accounting period
  • review correspondence with creditors/suppliers so as to ensure that pressure are not mounted by them.
  • review client profit forecast prepared for the subsequent accounting period
  • where the financial assistance is to be given by banks and other sister companies, review their degree of commitment
  • review the minutes of meeting of directors and management. 
  • review management rescue plans and ensure that they are consistent with the facts already known to the auditor.

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