Going concern in doubt, undertake additional audit procedures1.Assess cash flow, revenues, expenses, interim results2.Review debt contracts, board meeting minutes3.Discussions with client management and lawyersThen..
9/12/201718CONSIDER FACTORS THAT MITIGATE (REDUCE) GOING CONCERN RISKLetter of guarantee from parent companyAvailability of assets or segment of business for sale for cashAbility to raise funds through share issue or borrowing.Consider adequacy of client disclosures in financial statement about going concern issuesWhy an auditor need to consider (fraud, going concern etc) at planning stage?
9/12/2017Will the audit strategy be different for a high risk and low risk client?19AUDIT STRATEGY FOR HIGH RISK CLIENTAudit risk = fInherent RiskControl RiskDetection RiskHighHighLowAudit strategyNo (or very limited) tests of controlsIncreased reliance on substantive tests of transactions and account balancesAUDIT STRATEGY FOR LOW RISK CLIENTAudit risk = fInherent RiskControl RiskDetection RiskLowLowHighAudit strategyIncreased reliance on tests of controlsReduce reliance on substantive tests of transactions and account balances
9/12/2017What’s the relationship between inherent risk, control risk, detection risk and audit risk?20X. Audit RiskThe risk that the auditor expresses an inappropriate audit opinion when a financial statements is materially misstated.Audit StrategyThe determination of the amount of time spent testing the client’s internal controls and conducting detailed testing of transactions and account balances.AUDIT RISK & AUDIT STRATEGY
9/12/2017What type of risk is within the control of the auditor?What else auditor has to do during risk assessment stage?21