ICAI vide announcement dated May 10, 2020 issued Auditing Guidance on “Going Concern- Key Consideration for Auditors amid COVID-19”. Key takeaways of this guidance are:
This guidance provides “list of Frequently Asked Questions (FAQs) along with responses” to deal with the various situations in the current environment , when undertaking procedures relating to, and concluding on, the appropriateness of management’s use of the going concern basis of accounting in accordance with the Standards on Auditing (SAs). Key FAQs are listed below:
- Can an auditor rely on “Support Letter” from Parent Company in COVID-19 situation while making going concern assessment?
- What is the responsibility of the auditor if there is significant delay in the approval of financial statements?
- How are matters related to evaluation of an entity’s ability to continue as a going concern considered in the determination of key audit matters?
- Which factors should an auditor consider in determining the adequacy of management’s disclosures related to an entity’s ability to continue as a going concern?
- Which audit procedures should an auditor perform to evaluate management’s plans for future actions and the feasibility of those plans?
- How management should update or change its assessment of the entity’s ability to continue as a going concern from previous periods in the current situation?
- Whether the position as on balance sheet date i.e. as on 31st March 2020 or the position of the company post lock-down when auditors are signing the auditor’s reports, should be the basis for assessing going concern uncertainty?
- When evaluating management’s assessment of the entity’s ability to continue as a going concern, what period should be used by the auditor?
- Which matters specific to the current environment and the effects of the COVID-19 pandemic should be considered by the management when assessing the entity’s ability to continue as a going concern?