Philippine Standard on Auditing 570 (Redrafted) GOING CONCERN Scope of this PSA Deals with the auditor’s responsibility in the audit of financial statements with respect to management’s use of the going concern assumption in the preparation and presentation of the financial statements. Going Concern Assumption • Entity is viewed as continuing in business for the foreseeable future. • General purpose financial statements are prepared on a going concern basis, unless management either intends to liquidate the entity or to cease operations. Responsibilities of the Management • Some financial reporting frameworks contain an explicit requirement for management to make a specific assessment of the entity’s ability to continue as a going concern. Responsibilities of the Auditor • obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption in the preparation and presentation of the financial statements. Effective Date This PSA is effective for audits of financial statements for periods beginning on or after December 15, 2009. Objectives The objectives of the auditor are: (a) To obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption in the preparation and presentation 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 determine the implications for the auditor’s report REQUIREMENTS Risk Assessment Procedures and Related Activities • the auditor shall consider whether there are events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern Evaluating Management’s Assessment • The auditor shall evaluate management’s assessment of the entity’s ability to continue as a going concern. • consider whether management’s assessment includes all relevant information of which the auditor is aware as a result of the audit. Additional Audit Procedures When Events or Conditions Are Identified • the auditor shall obtain sufficient appropriate audit evidence to determine whether or not a material uncertainty exists through performing additional audit procedures, including consideration of mitigating factors Audit Conclusions and Reporting • Based on the audit evidence obtained, the auditor shall conclude whether, in the auditor’s judgment, a material uncertainty exists related to events or conditions that, individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern. Use of Going Concern Assumption Appropriate but a Material Uncertainty Exists • When the auditor concludes that the use of the going concern assumption is appropriate in the circumstances but a material uncertainty exists. • the auditor shall express a qualified or adverse opinion, as appropriate. The auditor shall state in the auditor’s report that there is a material uncertainty that may cast significant doubt about the entity’s ability to continue as a going concern Use of Going Concern Assumption Inappropriate If the financial statements have been prepared on a going concern basis but, in the auditor’s judgment, management’s use of the going concern assumption in the financial statements is inappropriate, the auditor shall express an adverse opinion. Management Unwilling to Make or Extend Its Assessment If management is unwilling to make or extend its assessment when requested to do so by the auditor, the auditor shall consider the implications for the auditor’s report. Philippine Standard on Auditing 580 (Revised and Redrafted) WRITTEN REPRESENTATIONS Introduction Scope of this PSA deals with the auditor’s responsibility to obtain written representations from management and, where appropriate, those charged with governance. Written Representations as Audit Evidence Audit evidence is all the information used by the auditor in arriving at the conclusions on which the audit opinion is based. • Written representations are necessary information that the auditor requires in connection with the audit of the entity’s financial statements. Accordingly, similar to responses to inquiries, written representations are audit evidence. • Objectives (a) To obtain written representations from management that management believes that it has fulfilled the fundamental responsibilities that constitute the premise on which an audit is conducted (b) To support other audit evidence relevant to the financial statements . (c) To respond appropriately to written representations provided by management or if management does not provide the written representations requested by the auditor. Definitions Written representation – A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. Written representations in this context do not include financial statements, the assertions therein, or supporting books and records. Requirements Management from whom Written Representations Requested The auditor shall request written representations from management with appropriate responsibilities for the financial statements and knowledge of the matters concerned. Written Representations about Management’s Responsibilities • The auditor shall request management to provide a written representation that it has fulfilled its responsibility for the preparation and presentation of FS. • request management to provide a written representation that it has provided the auditor with all relevant information Date of and Period(s) Covered by Written Representations The date of the written representations shall be as near as practicable to, but not after, the date of the auditor’s report on the financial statements. Form of Written Representations The written representations shall be in the form of a representation letter addressed to the auditor. If law or regulation requires management to make written public statements about its responsibilities, and the auditor determines that such statements provide some or all of the representations , the relevant matters covered by such statements need not be included in the representation letter Doubt as to the Reliability of Written Representations and Requested Written Representations Not Provided if written representations are inconsistent with other audit evidence, the auditor shall perform audit procedures to attempt to resolve the matter. • If the matter remains unresolved, the auditor shall reconsider the assessment of the competence, integrity, ethical values or diligence of management, or of its commitment to or enforcement of these, and shall determine the effect that this may have on the reliability of representations (oral or written) and audit evidence in general. • If management does not provide one or more of the requested written representations, the auditor shall: (a) Discuss the matter with management; (b) Reevaluate the integrity of management and evaluate the effect that this may have on the reliability of representations (oral or written) and audit evidence in general; and (c) Take appropriate actions, including determining the possible effect on the opinion in the auditor’s report.
