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Question 4 [20 marks] Going concern assumption is an important fundamental principle in the preparation of financial...

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Finance

Question 4 [20 marks]
Going concern assumption is an important fundamental principle inthe preparation of financial statements. Therefore the auditor musttake particular attention of this assumption as he carries out hisaudit.


Required:
a. What is going concern? (5)
b. How does an auditor identify going concern factors and what isits effect on the audit on the audit report? (15)

Answer & Explanation Solved by verified expert
3.8 Ratings (474 Votes)
a The going concern assumption is a basic assumption for the accounting of a business entity For a company to be a going concern it must be able to continue operating long enough to carry out its commitments obligations and objectives In other words the company will not have to liquidate or be forced out of business The important aspect is that there should be no intent to close down or lower down the operations in the foreseeable future If there is uncertainty as to a companys ability to meet the going concern assumption the facts and conditions must be disclosed in its financial    See Answer
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