Question

Read “The auditor’s consideration of an entity’s ability to continue as a going concern.”

Based on the reading, analyze the auditor’s responsibility to determine whether a company can continue as a going concern. From your analysis, propose at least two (2) key factors auditors need to consider when determining an entity’s ability to continue as a going concern. Provide your rationale.

Answer 1

Page-1 Answer: According to the given question, the following are the two factors that an auditor need to consider when determining an entity's ability: factors: ② Ability of the company to pay - debits: * Due to necessity, companies purchase haw materials and other items on. the credit basis. So creditors should be paid in time otherwise the suppliers may not ready to supply products on credit basis. Unavailability of raw materials lead to stoppage of work and also lead to market loss, due to high competition, product according to demand should be available in the market as and

. when Page-2 the necessity arise. So there should be a pleasant relationship between creditors and the company. That means timely settlement of debits. . - So the auditor should evaluate the debt paying capacity of the business. Default in paying debt may affect the concept of going concern. © Financial statement showing Continues loss.- As we all know that loss is a dangerous situation and directly affect the ongoing business of the company. A financial statement showing continues loss means that the cmpany Ps not in a position to carry on business well. This may be due to various factors such as high competition, change of technologies, disputes arise inside and outside the company decision making problems, raw material availability etcong Jres,

Page-3 Auditor should properly evaluate and find the reason for continues loss and suggest necessary stepts to overcome the situation. otherwise the company will not last for long. please give a positive thumps up if you are satisfied with this answer.