- 15 Marks
AAA – May 2018 – L3 – SC – Q6 – Risk Management in Audits
Identify and explain audit procedures to assess the going concern of Reliance Ventures Limited and steps if going concern assumption is invalid.
Question
Reliance Ventures Limited has been trading in imported goods for many years. The company’s fortune has started to diminish as a result of the current economic environment. Your firm has been the auditor of the company in the last three years. You have noticed that the shareholders’ equity of the company has been eroded and is currently in deficit. This condition has raised significant doubt on the entity’s ability to continue as a going concern.
Required:
- Identify and explain FOUR audit procedures to be performed by the audit team to determine the going concern status of the company. (10 Marks)
- Discuss FOUR of the steps that the auditor should take if he considers that the going concern assumption is invalid whereas management considers it to be valid. (5 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Procedures, Financial Distress, Going Concern, Management's Assumptions
- Level: Level 3
- Topic: Risk Management in Audits
- Series: MAY 2018
