Question 4

4.1. What does the phrase the financial statements are presented on the going concern basis mean and briefly explain why the auditor is interested in the going concern ability of a company? (4 marks)

4.2. What is the auditors responsibility with regards to the basis of preparation, where management has used the going concern assumption in the preparation of the financial statements? (3 marks)

4.3. When evaluating the adoption of the going concern basis presentation, should the auditor consider both aggravating factors and mitigating factors? Explain. (3 marks)

4.4. Differentiate factual insolvency and commercial insolvency? (2 marks)

4.5. Describe eight procedures which the auditor may carry out when evaluating the going concern ability of a company? (8 marks)