Question 1 (15 marks)

1. Explain, in terms of ISA 570 (Revised) What Going Concern, the adoption of the going concern basis of accounting in the preparation of the annual financial statements means. (2)

2. Outline the objectives of the auditor when conducting audit procedures relating to the going concern assumption? (2)

3. Explain whether the going concern is an assertion? Justify. (2)

4. If the auditor issues an unmodified report on the annual financial statements, can a user take this as a guarantee that the company will remain a going concern for the foreseeable future? Justify. (2)

5. Para 10 of ISA 570 (Revised) states that "the auditor shall, when performing risk assessment procedures as required by ISA 315 (Revised), consider whether there are events or conditions that may cast significant doubt on the entity's ability to continue as a going concern". Is the risk assessment stage of the audit the only stage during the audit that the auditor needs to consider the going concern ability of the company? Justify. (3)

6. If management (the directors) have already performed an assessment of their company's going concern ability, discuss whether it is necessary for the auditor to perform an assessment of going concern? Justify. (2)

7. Explain the term mitigating factor. (1)

8. If the financial statements are prepared on the going concern basis and the auditor is satisfied that this basis is inappropriate, describe the type of audit opinion the auditor should give? (1)