An audience with Advisory Services
ICAEW Advisory Services’ Kirsty Jones shares some questions and answers from the faculty’s audit conference on various topics including sufficient audit evidence, rights to working papers, and more.
I am auditing a UK limited company that has been loss-making for the last three years and has negative reserves at the balance sheet date. The sole director-shareholder has provided a letter of support to the company, such that if the company requires funding in the foreseeable future to meet its obligations as they fall due, the shareholder has agreed to provide such funds. Is this letter sufficient audit evidence to mean that a material uncertainty in relation to going concern does not exist?
Paragraph 6 of the International Standard on Auditing (ISA) (UK) 570 Going Concern sets out your responsibilities, as an auditor, with respect to going concern. You are required to obtain sufficient appropriate audit evidence regarding the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements, and to conclude, based on the audit evidence obtained, whether a material uncertainty exists about the entity’s ability to continue as a going concern.