Impact of Covid-19 on Going Concern Part 1

Impact of Covid-19 on Going Concer Part 1

Going Concern

Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its operation.

Auditor wants to know whether the company’s going concern is affected by COVID-19.

Auditing Standard Going Concern

ISA 570 (Revised), Going Concern, requires auditors:

(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 ISA.

Covid 19 Event/Conditions

The following examples of events and conditions that may exist as result of Covid-19:
• Loss of major market, key customer(s), revenue, labour shortages
• Significant deterioration in value of assets used to generate cash flows
• Significant deterioration in the value of current assets – inventory
• Delay in the launch of new products or services
• Foreign exchange fluctuations
• Measurements affected by increased uncertainty
• Counterparty credit risk
• The entity’s solvency

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