what are the difficulties faced by auditors when assessing the going concern issue?

Expert Solution

The difficulty faced is that the audit firm may not be able to objectively assess going concern factors when in addition becoming involved with non-audit services pertaining to the going concern status of the company.

In evaluating going concern, the auditor will consider whether necessary borrowing facilities are in place and in doing so will attempt to obtain confirmations from the company's bankers. However, the bankers may be reluctant to confirm whether the borrowing facilities will be available, in which case the auditor should consider the significance of this to the entity's ability to continue as a going concern, and also consider, through discussion with management, whether there are other strategies or sources of finance available.

Cash flow statement forms the basis of going concern issue and hence its reliability is of utmost importance and reasonability of assumptions made which is a difficult task for auditor.

ekkarill92 answered 2 years ago

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