Task: A staff auditor has just returned from a continuing professional education workshop on current auditing standards. One of her managers has asked her to prepare a training session for the rest of the staff. In particular, he wants her to discuss the standard related to the client's ability to continue as a going concern.
Required to answer:
Part 1: Describe the auditor's responsibility for assessing each client's ability to continue as a going concern.
Part 2: Describe the effect on the financial statements and on the auditor's report for each of the following independent situations.
A. The auditor has substantial doubt as to whether the client is a going concern.
B. The auditor believes the footnote describing the going concern problem is inadequate. In the prior year statements, a going concern problem had been disclosed and was referred to in the auditor's prior year report, but the uncertainty has been eliminated this year. Comparative statements will be issued.
C. The auditor concludes that the client is likely to continue in existence for at least one more year. The same conclusion had been reached in prior years.
D. The client was forced into bankruptcy by creditors after year-end but before the audit was completed.