每日一练F8 (UK) 答案回复可见
<p>5 Smithson Ltd provides scientific services to a wide range of clients. Typical assignments range from testing food for<br/>illegal additives to providing forensic analysis to assist law enforcement officers.<br/>The annual audit is nearly complete. As audit senior you have reported to the engagement partner that Smithson is<br/>having some financial difficulties. Income has fallen due to the adverse effect of two high-profile court cases, where<br/>Smithson’s services to assist the prosecution were found to be in error. Not only did this provide adverse publicity for<br/>Smithson, but a number of clients withdrew their contracts. A senior employee then left Smithson, stating lack of<br/>investment in new analysis machines was increasing the risk of incorrect information being provided by the company.<br/>A cash flow forecast prepared internally shows Smithson requiring significant additional cash within the next 12<br/>months to maintain even the current level of services. Smithson’s auditors have been asked to provide a negative<br/>assurance report on this forecast.<br/>Required:<br/>(a) Define ‘going concern’ and discuss the auditor’s responsibilities in respect of going concern. (4 marks)<br/>(b) State the audit procedures that may be carried out to try to determine whether or not Smithson Ltd is a going<br/>concern. (8 marks)<br/>(c) Explain the audit procedures the auditor may take where the auditor has decided that Smithson Ltd is<br/>unlikely to be a going concern. (4 marks)<br/>(d) In the context of the cash flow forecast, define the term ‘negative assurance’ and explain how this differs<br/>from the assurance provided by an audit report on statutory financial statements. (4 marks)<br/>(20 marks)</p><p></p><p>5 (a) Going concern<br/>Going concern means that the enterprise will continue in operational existence for the foreseeable future without the intention<br/>or necessity of liquidation or otherwise ceasing trade. It is one of the fundamental accounting concepts used by auditors and<br/>stated in FRS 18 Accounting policies.<br/>The auditor’s responsibility in respect of going concern is explained in ISA 570 (UK and Ireland) Going concern. The ISA<br/>states ‘when planning and performing audit procedures and in evaluating the results thereof, the auditor should consider the<br/>appropriateness of management’s use of the going concern assumption in the preparation of the financial statements’.<br/>The auditor’s responsibility therefore falls into three areas:<br/>(i) To carry out appropriate audit procedures that will identify whether or not an organisation can continue as a going<br/>concern.<br/>(ii) To ensure that the organisation’s management have been realistic in their use of the going concern assumption when<br/>preparing the financial statements.</p><p>(iii) To report to the members where they consider that the going concern assumption has been used inappropriately, for<br/>example, when the financial statements indicate that the organisation is a going concern, but audit procedures indicate<br/>this may not be the case.<br/>(b) Audit procedures regarding going concern<br/>– Obtain a copy of the cash flow forecast and discuss the results of this with the directors.<br/>– Discuss with the directors their view on whether Smithson can continue as a going concern. Ask for their reasons and<br/>try and determine whether these are accurate.<br/>– Enquire of the directors whether they have considered any other forms of finance for Smithson to make up the cash<br/>shortfall identified in the cash flow forecast.<br/>– Obtain a copy of any interim financial statements of Smithson to determine the level of sales/income after the year-end<br/>and whether this matches the cash flow forecast.<br/>– Enquire about the possible lack of capital investment within Smithson identified by the employee leaving. Review current<br/>levels of fixed assets with similar companies and review purchase policy with the directors.<br/>– Consider the extent to which Smithson relied on the senior employee who recently left the company. Ask the human<br/>resources department whether the employee will be replaced and if so how soon.<br/>– Obtain a solicitor’s letter and review to identify any legal claims against Smithson related to below standard services<br/>being provided to clients. Where possible, consider the financial impact on Smithson and whether insurance is available<br/>to mitigate any claims.<br/>– Review Smithson’s order book and client lists to try and determine the value of future orders compared to previous years.<br/>– Review the bank letter to determine the extent of any bank loans and whether repayments due in the next 12 months<br/>can be made without further borrowing.<br/>– Review other events after the end of the financial year and determine whether these have an impact on Smithson.<br/>– Obtain a letter of representation point confirming the directors’ opinion that Smithson is a going concern.<br/>(c) Audit procedures if Smithson is not considered to be a going concern<br/>– Discuss the situation again with the directors. Consider whether additional disclosures are required in the financial<br/>statements or whether the financial statements should be prepared on a ‘break up’ basis.<br/>– Explain to the directors that if additional disclosure or restatement of the financial statements is not made then the<br/>auditor will have to modify the audit report.<br/>– Consider how the audit report should be modified. Where the directors provide adequate disclosure of the going concern<br/>situation of Smithson, then an emphasis of matter paragraph is likely to be appropriate to draw attention to the going<br/>concern disclosures.<br/>– Where the directors do not make adequate disclosure of the going concern situation then qualify the audit report making<br/>reference to the going concern problem. The qualification will be an ‘except for’ opinion or an adverse opinion depending<br/>on the auditor’s opinion of the situation.<br/>(d) Negative assurance<br/>Negative assurance means that nothing has come to the attention of an auditor which indicates that the cash flow forecast<br/>contains any material errors. The assurance is therefore given on the absence of any indication to the contrary.<br/>In contrast, the audit report on statutory financial statements provides positive or reasonable assurance; that is the financial<br/>statements do show a true and fair view.<br/>Using negative assurance, the auditor is warning users that the cash flow forecast may be inaccurate. Less reliance can<br/>therefore be placed on the forecast than the financial statements, where the positive assurance was given.<br/>With negative assurance, the auditor is also warning that there were limited audit procedures that could be used; the cash<br/>flow relates to the future and therefore the auditor cannot obtain all the evidence to guarantee its accuracy. Financial<br/>statements relate to the past, and so the auditor should be able to obtain the information to confirm they are correct; hence<br/>the use of positive assurance.</p>页:
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