To audit going concern under ISA 570, the auditor should follow the principles and procedures of auditing going concern, which are the principles and procedures that govern the assessment of an entity’s ability to continue as a going concern.
The key steps in auditing going concern under ISA 570 are as follows:
- Understand the entity and its environment: The first step in auditing going concern under ISA 570 is to understand the entity and its environment. The auditor should obtain an understanding of the entity’s business, its industry, and its economic environment. The auditor should also obtain an understanding of the entity’s financial position, its liquidity, and its capital structure.
- Identify and assess the risks of going concern: The second step in auditing going concern under ISA 570 is to identify and assess the risks of going concern. The auditor should identify the risks that may impact the entity’s ability to continue as a going concern, such as financial difficulties, operational challenges, and regulatory changes. The auditor should assess the likelihood and the impact of the risks on the entity’s ability to continue as a going concern.
- Obtain management’s assessment of going concern: The third step in auditing going concern under ISA 570 is to obtain management’s assessment of going concern. Management is responsible for preparing the financial statements and assessing the entity’s ability to continue as a going concern. The auditor should obtain management’s assessment of going concern, including the assumptions, judgments, and estimates used in the assessment.
- Evaluate the adequacy of management’s assessment of going concern: The fourth step in auditing going concern under ISA 570 is to evaluate the adequacy of management’s assessment of going concern. The auditor should evaluate whether management’s assessment is reasonable and appropriate in the circumstances. The auditor should consider whether the assumptions, judgments, and estimates used in the assessment are reasonable and supported by the facts and circumstances.
- Conclude on the going concern assumption: The fifth step in auditing going concern under ISA 570 is to conclude on the going concern assumption. Based on the auditor’s assessment of the risks of going concern and the adequacy of management’s assessment, the auditor should conclude on the appropriateness of the going concern assumption. If the auditor has concerns about the entity’s ability to continue as a going concern, the auditor should evaluate the implications for the financial statements and the audit.
