TWSA570 GOING CONCERN

Status

Revised by Auditing Standards Committee in Taiwan on 4 October, 2022

Summary

This Standard deals with the auditor’s responsibilities in the audit of financial statements relating to going concern and the implications for the auditor’s report.
The objectives of the auditor are:

(a) To obtain sufficient appropriate audit evidence regarding, and conclude on, the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements;

(b) To conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern; and

(c) To report in accordance with this Standard.

When performing risk assessment procedures, the auditor shall consider whether events or conditions exist that may cast significant doubt on the entity’s ability to continue as a going concern. In so doing, the auditor shall determine whether management has already performed a preliminary assessment of the entity’s ability to continue as a going concern. If such an assessment has been performed, the auditor shall evaluate management’s assessment, discuss the assessment with management, and determine whether management has identified events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If such an assessment has not yet been performed, the auditor shall discuss with management the basis for the intended use of the going concern basis of accounting, and inquire of management whether events or conditions exist that may cast significant doubt on the entity’s ability to continue as a going concern.

If events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern, the auditor shall obtain sufficient appropriate audit evidence to determine whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern through performing additional audit procedures.

If the auditor concludes that management’s use of the going concern basis of accounting is appropriate but a material uncertainty exists, the auditor shall determine whether the financial statements disclose adequately.

If adequate disclosure about the material uncertainty is made in the financial statements, the auditor shall express an unmodified opinion and the auditor’s report shall include a separate section under the heading “Material Uncertainty Related to Going Concern” to draw attention to the note in the financial statements that discloses the matters and state that these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern and that the auditor’s opinion is not modified in respect of the matter.

If adequate disclosure about the material uncertainty is not made in the financial statements, the auditor shall (a) express a qualified opinion or adverse opinion, as appropriate; and (b) in the Basis for Qualified (Adverse) Opinion section of the auditor’s report, state that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern and that the financial statements do not adequately disclose this matter.

If the financial statements have been prepared using the going concern basis of accounting but, in the auditor’s judgment, management’s use of the going concern basis of accounting in the preparation of the financial statements is inappropriate, the auditor shall express an adverse opinion regardless of whether or not the financial statements include disclosure of the inappropriateness of management’s use of the going concern basis of accounting.

In certain circumstances, the auditor may believe it necessary to request management to make or extend its assessment. If management is unwilling to do so, a qualified opinion or a disclaimer of opinion in the auditor’s report may be appropriate.

Effective date

This Standard is effective from 15 December, 2022.