All 18 Going Concern questions
More in Going Concern
What is the difference between going concern doubt and actual insolvency? Why is going concern important to users of financial statements? What is a support letter (comfort letter) in a going concern context? What are indicators that going concern may be in doubt? What time period does the going concern assessment cover? What are mitigating factors in a going concern assessment? What disclosures are required when there is significant going concern doubt? How does going concern relate to Key Audit Matters (KAMs)? What is a material uncertainty related to going concern? How do going concern conclusions affect the auditor's report?
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Auditing & Assurance › Going Concern

How does the auditor evaluate management's going concern assessment?

Intermediate

Answer

The auditor evaluates management's assessment (usually cash-flow forecasts covering at least 12 months): testing the reliability of underlying data, challenging key assumptions, checking arithmetic and sensitivity, considering the feasibility of mitigating plans (e.g., refinancing, asset sales), reviewing subsequent events and post-year-end results, and obtaining written representations about future plans.
Real-world example The auditor stress-tests the forecast's sales assumptions and confirms a claimed refinancing is realistically committed.

Common follow-ups: What period should the forecast cover? | How do you test mitigating plans?

Audit Evidence & Procedures Analytical Procedures Going Concern
All 18 Going Concern questions