The auditor should evaluate whether Sufficient and appropriate audit evidence has been obtained and conclude on appropriateness of management use of going concern basis of accounting in preparation of Financial Statements
2) Based on audit evidence obtained, conclude whether material uncertainty exists related to events or conditions that, individually or collectively, may cast significant doubt on entity’s ability to continue as a going concern.
i) Adequacy of Disclosures – in case of material uncertainity exist
a) Adequately disclose principal events or conditions that may cast significant doubt o the entity’s ability to continue as a going concern and mgt’s plans to deal with these events and conditions and
b) Disclose clearly that there is material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business.
and in case of no material uncertainity exist the auditor should evaluate whether in view of the requirenment of FRF , FS provide adequate disclosures about these events or conditions
ii) the impact on audit opinion in audit report
1)Use of Going Concern Basis of Accounting Is Inappropriate
If FS have been prepared using going concern basis of accounting but, in auditor’s judgment, mgt’s use of the going concern basis of accounting in the preparation of FS is inappropriate auditor shall express an adverse opinion.
2)Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty exist
Adequate Disclosure of a Material Uncertainty Is Made in Financial Statements → Auditor shall express an unmodified opinion and report shall include separate section under the heading” Material Uncertainty Related to Going Concern”
3)Adequate Disclosure of a Material Uncertainty Is Not Made in F.S. → If adequate disclosure about material uncertainty is not made in financial statements, auditor shall: Express a qualified opinion or adverse opinion, as appropriate, in accordance with SA 705
