CASE STUDY Emily Gordon, a junior auditor with Thomas and Associates (Thomas), has noticed that the audit strategy for Toby Ltd includes a paragraph specifically requiring Thomas to consider going concern problems. Emily quickly looks at the interim financial report attached and believes that the entity does not appear to have any going concern problems. She is not sure why specific comment about the appropriateness of the going concern basis has been made in the audit strategy and asks you as her audit senior for an explanation.

Required

As the audit senior of Toby Ltd, explain to Emily why it is necessary to assess the risk of going concern problems as part of the audit planning process.