When performing risk assessment procedures as required by ASA 315^[3] the auditor shall consider whether events or conditions exist that may cast significant doubt on the entity’s ability to continue as a going concern.  In so doing, the auditor shall determine whether management has already performed a preliminary assessment of the entity’s ability to continue as a going concern, and: (Ref: Para. A3–A6) 

1. If such an assessment has been performed, the auditor shall discuss the assessment with management and determine whether management has identified events or conditions that, individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern and, if so, management’s plans to address them; or 
2. If such an assessment has not yet been performed, the auditor shall discuss with management the basis for the intended use of the going concern basis of accounting, and enquire of management whether events or conditions exist that, individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern. 

The auditor shall remain alert throughout the audit for audit evidence of events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern.  (Ref: Para. A7)

The auditor shall evaluate management’s assessment of the entity’s ability to continue as a going concern.  (Ref: Para. A8–A10, A12–A13)

[Deleted by the AUASB.  Refer Aus 13.1^[4]]

In evaluating management’s assessment of the entity’s ability to continue as a going concern, the auditor shall consider the relevant period as defined in paragraph Aus 13.2 of this Auditing Standard, which may be the same or may differ from that used by management to make its assessment as required by the applicable financial reporting framework.  If management’s assessment of the entity’s ability to continue as a going concern covers less than the relevant period, the auditor shall request management to extend its assessment period to correspond to the relevant period used by the auditor.  (Ref: Para. A11–A13)

Relevant period means the period of approximately twelve months from the date of the auditor’s current report to the expected date of the auditor’s report for: 

1. the next annual reporting date in the case of an annual financial report; or 
2. the corresponding reporting period for the following year in the case of an interim financial reporting period.

In evaluating management’s assessment, the auditor shall consider whether management’s assessment includes all relevant information of which the auditor is aware as a result of the audit.

The auditor shall enquire of management as to its knowledge of events or conditions beyond the period of management’s assessment that may cast significant doubt on the entity’s ability to continue as a going concern. (Ref: Para. A14–Aus A15.1)

If events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern, the auditor shall obtain sufficient appropriate audit evidence to determine whether or not 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 (hereinafter referred to as “material uncertainty”) through performing additional audit procedures, including consideration of mitigating factors.  These procedures shall include: (Ref: Para. A16) 

1. Where management has not yet performed an assessment of the entity’s ability to continue as a going concern, requesting management to make its assessment.  
2. Evaluating management’s plans for future actions in relation to its going concern assessment, whether the outcome of these plans is likely to improve the situation and whether management’s plans are feasible in the circumstances.  (Ref: Para. A17)
3. Where the entity has prepared a cash flow forecast, and analysis of the forecast is a significant factor in considering the future outcome of events or conditions in the evaluation of management’s plans for future actions: (Ref: Para. A18–A19)
   1. Evaluating the reliability of the underlying data generated to prepare the forecast; and 
   2. Determining whether there is adequate support for the assumptions underlying the forecast. 
4. Considering whether any additional facts or information have become available since the date on which management made its assessment. 
5. Requesting written representations from management and, where appropriate, those charged with governance, regarding their plans for future actions and the feasibility of these plans.  (Ref: Para. A20)

The auditor shall evaluate whether sufficient appropriate audit evidence has been obtained regarding, and shall conclude on, the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial report.

Based on the audit evidence obtained, the auditor shall conclude whether, in the auditor’s judgement, 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.  A material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence is such that, in the auditor’s judgement, appropriate disclosure of the nature and implications of the uncertainty is necessary for: (Ref: Para. A21-A22) 

1. In the case of a fair presentation financial reporting framework, the fair presentation of the financial report, or 
2. In the case of a compliance framework, the financial report not to be misleading.

Adequacy of Disclosures When Events or Conditions Have Been Identified and a Material Uncertainty Exists

If the auditor concludes that management’s use of the going concern basis of accounting is appropriate in the circumstances but a material uncertainty exists, the auditor shall determine whether the financial report: (Ref: Para. A22‒A23)

1. Adequately discloses the principal events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and management’s plans to deal with these events or conditions; and 
2. Discloses clearly that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. 

Adequacy of Disclosures When Events or Conditions Have Been Identified but No Material Uncertainty Exists

If events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern but, based on the audit evidence obtained the auditor concludes that no material uncertainty exists, the auditor shall evaluate whether, in view of the requirements of the applicable financial reporting framework, the financial report provide adequate disclosures about these events or conditions.  (Ref: Para. A24–A25)

Use of Going Concern Basis of Accounting Is Inappropriate

If the financial report has been prepared using the going concern basis of accounting but, in the auditor’s judgement, management’s use of the going concern basis of accounting in the preparation of the financial report is inappropriate, the auditor shall express an adverse opinion.  (Ref: Para. A26–A27)

Use of Going Concern Basis of Accounting Is Appropriate but a Material Uncertainty Exists 

Adequate Disclosure of a Material Uncertainty Is Made in the Financial Report

If adequate disclosure about the material uncertainty is made in the financial report, the auditor shall express an unmodified opinion and the auditor’s report shall include a separate section under the heading “Material Uncertainty Related to Going Concern” to: (Ref: Para. A28‑A31, A34) 

1. Draw attention to the note in the financial report that discloses the matters set out in paragraph 19 of this Auditing Standard; and 
2. State that these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern and that the auditor’s opinion is not modified in respect of the matter.

Adequate Disclosure of a Material Uncertainty Is Not Made in the Financial Report

If adequate disclosure about the material uncertainty is not made in the financial report, the auditor shall: (Ref: Para. A32–A34) 

1. Express a qualified opinion or adverse opinion, as appropriate, in accordance with ASA 705^[5]; and 
2. In the Basis for Qualified (Adverse) Opinion section of the auditor’s report, state that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern and that the financial report does not adequately disclose this matter. 

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. (Ref: Para. A35-Aus A35.1)

Unless all those charged with governance are involved in managing the entity,^[6] the auditor shall communicate with those charged with governance events or conditions identified that may cast significant doubt on the entity’s ability to continue as a going concern.  Such communication with those charged with governance shall include the following: 

1. Whether the events or conditions constitute a material uncertainty; 
2. Whether management’s use of the going concern basis of accounting is appropriate in the preparation of the financial report; 
3. The adequacy of related disclosures in the financial report; and 
4. Where applicable, the implications for the auditor’s report.

If there is significant delay in the approval of the financial report by management or those charged with governance after the date of the financial report, the auditor shall enquire as to the reasons for the delay.  If the auditor believes that the delay could be related to events or conditions relating to the going concern assessment, the auditor shall perform those additional audit procedures necessary, as described in paragraph 16 of this Auditing Standard, as well as consider the effect on the auditor’s conclusion regarding the existence of a material uncertainty, as described in paragraph 18 of this Auditing Standard.