QUESTION 3

The valuation bases adopted in the accounts will assume that the company is a going concern, in accordance with Statement of Standard Accounting Practice (SSAP) 2. So it follows that auditors must carry out sufficient work to ensure that this assumption is justified. This means that seeking evidence that the company is likely to continue trading for at least a further twelve months (Michael J. Pratt Auditing Longman)

a) Discuss the relevance of the Audit Engagement Letter to the auditor and audit client

b) With practical scenarios, critically examine the appropriate methods for gathering audit evidence, stating the degree of reliability you will place on each method

c) Discuss the circumstances that may warrant an independent auditor to have a substantial doubt about the going concern of an entity.