• Government Policy Decisions: The cessation of a public sector entity is most likely to result from a government policy decision. A policy decision may be taken to wind up and dissolve an entity in its entirety, to scale back its operations and transfer some of its functions to another public entity, merge with another public entity, or privatize the entity. In each of these cases, the operational existence of all or part of the entity ceases. Only in the case of dissolution without any continuation of the entity would the going concern basis cease to be appropriate.
• Risk Associated with Changes in Policy Direction: Public sector auditors consider the greater risk associated with changes in government policies that could impact the audited entity’s going concern assumption. A change in government may lead to a change in priorities that could affect the continued operation of the entity.
• Operational or Business Risks: Public sector entities may face operational or business risks, such as insufficient working capital to continue operations at their existing level. However, in the public sector, the fact that an entity has liquidity problems or is not profitable does not necessarily indicate going concern problems, as the government may choose to resource it when necessary to continue operations.
• Government Reviews and Announcements: Auditors ascertain whether the government has declared its intention to review an area of policy affecting the audited entity, whether a review has been announced and is in progress, or whether a review has indicated that the audited entity could be rationalized or its future re-examined.
• Impact on Public Sector Mandate: The auditor will consider whether the public sector entity is fulfilling its mandate and whether the government’s priorities or public needs have shifted, which may influence whether the entity will continue to operate as a going concern.
• Legal Framework: The auditor will review the legal framework under which the public sector entity operates to assess whether there are any legal obligations or protections that might ensure its continued existence despite financial challenges.
• Financial Dependency on Government Funding: The extent to which the entity is financially dependent on government funding and whether such funding is likely to continue is another key consideration for the auditor.
• Budgetary Constraints and Approvals: The auditor will consider whether budgetary constraints or delays in funding approvals could affect the entity’s ability to continue operating as a going concern.

(Any 5 points @ 2 marks each = 10 marks)