Question

Your are required to present one or two audit issue (s) based on the topic of *Important issues in financial statement audit*.

1. The primary goal of your audit issue(s) is not to judge whether the issue(s) was good or bad but to examine it carefully in order to understand better the complexities of auditing.

Answer 1

Some of the challenging issues auditor has to handle are as following:

1. Going Concern: The auditor must consider performing audit procedures to obtain appropriate audit evidence regarding the credibility of the going concern. Thus, the auditor should
   • Review the management's assessment of going concern procedure.
   • Evaluate the cash forecasts and the underlying assumptions for making such forecasts.
   • Consider all other factors affecting the survival and continuance of the business entity.
   • Obtain written representations from the management regarding their accountability for the going concern.
2. Fair value measurement: Auditor must evaluate if the measurement of items in the financial statements recognised at their fair values are accurate, fair and correct. For this the auditor must,
   • Review if items are measured in comfirmity the Generally Accepted Accounting Principles and Practices.
   • Gather and evaluate the available evidences used by management for fair value measurement. Seek external evidences and expert advise wherever necessary.
   • Review the underlying assumptions pertaining to cashflow forecasts made.
   • Evaluate the assumptions made especially when data isn't readily and easily available for fair value measurement