03-31-2004, 12:29 AM
Going concern disclosure is necessary when the auditor concludes that co. is unlikely to carry on trading in the FORESEEABLE FUTURE (defi. of foreseeable future important).
IF going concern is an issue, then the next question to ask is, Whether the concern is significant or not.
If concern significant, then financial stat. need preparing on split up basis (Personally, I have not yet done this in my career).
However, if concern is not significant but substantial, then disclosure required in the notes to the accounts and a "emphasis para" in the audit report as was described by irfanahmedmeer.
Now coming to the question, I have a client, in profit, balance sheet in green territory. But I see a letter from the bank saying that they are unable to renew the overdraft line for the next year. if I conclude that company is then unable to pay its liabilities in the foreseeable future, i need to disclose the precise nature of my concern, its impact and any actions taken by directors to overcome in the notes to the account and then because of the nature of the matter, i will draw readers attention in the audit report. but such attention is not a qualification.
in short, it is quite possible, company making a profit having a red balance sheet have emphasis para inserted in the audit report just because it is unable to finance its liabilities as and when they y fall due.
IF going concern is an issue, then the next question to ask is, Whether the concern is significant or not.
If concern significant, then financial stat. need preparing on split up basis (Personally, I have not yet done this in my career).
However, if concern is not significant but substantial, then disclosure required in the notes to the accounts and a "emphasis para" in the audit report as was described by irfanahmedmeer.
Now coming to the question, I have a client, in profit, balance sheet in green territory. But I see a letter from the bank saying that they are unable to renew the overdraft line for the next year. if I conclude that company is then unable to pay its liabilities in the foreseeable future, i need to disclose the precise nature of my concern, its impact and any actions taken by directors to overcome in the notes to the account and then because of the nature of the matter, i will draw readers attention in the audit report. but such attention is not a qualification.
in short, it is quite possible, company making a profit having a red balance sheet have emphasis para inserted in the audit report just because it is unable to finance its liabilities as and when they y fall due.
